Libor Scandal Results in Higher Interest Rates and Exchange Rates for Americans
People who were given loans with an adjustable rate, such as credit cards, mortgages, or private student loans, or those who have traveled abroad between 2007 and 2013, may have paid higher interest rates due to a scam involving some popular banks. It is reported that the scam could have also affected pension funds and many types of loans given between 2007 and 2013. Some of the banks reportedly involved in the scam are Citigroup, JPMorgan Chase, and Barclays. It has also been reported that one of the banks involved in the scam has already admitted to putting money away to prepare for settlements. If you took out loans with adjustable rates or traveled outside of the United States between 2007 and 2013, you may be part of a class action. Please contact us at 817-455-6822 or by using the form on this page.
How the Libor Scandal Affects Interest Rates
The United States bases its interest rates for loans on a rate that is set in London. This rate is known as the London Interbank Offered Rate, or “LIBOR”. There are many banks that help set this rate. The rate is set by asking these banks for the rate at which they would allow another bank to borrow money from them for a short term loan. Then based on what the banks say, a rate is set and reported. The purpose of setting this London offered rate or LIBOR, is to help guide other countries in setting their own interest rates. The United States is one of the countries that uses the LIBOR to set its interest rates.
How the Libor Rigging Worked
It is alleged that instead of honestly reporting the rate that the banks would give short term loans, the banks misrepresented the real rate, by either reporting a higher or lower rate. The banks allegedly did so based on a scam involving private chat room conversations between the banks and other brokers. Participating in this scam would reportedly allow the banks to make more money for themselves when trading. It is also reported that the banks would say they could lend money at a lower interest rate to make the bank itself seem healthier.
How the Scandal Affects Loans in the United States
Since the United States is one of the countries relying on this London rate, or LIBOR, the higher or lower interest rates change the rates at which Americans are able to get loans. Here, Americans may have paid more money than they would have if the rates had been honestly decided.
How the Scandal Affects Travelers
Foreign exchange rates are used by millions of people when traveling to different countries. The rates affect travelers who trade their U.S. dollars for the money of the country they are visiting. The amount of foreign money a person gets when exchanging U.S. dollars changes based on the demand for that money. It is reported that if a foreign country has high interest rates, that can affect the demand for its money.
Experts believe that the recent investigations and the guilty pleas from these large banks will benefit consumers and investment managers affected by this scam.
If you obtained a credit, home mortgage, student loan, or exchanged foreign money between 2007 and 2013, please contact us using the form on this page or at 817-455-6822.