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U.S. judge rejects class action student loan claims in Libor litigation


(Reuters) — The U.S. judge overseeing private litigation accusing global banks of manipulating the Libor interest rate benchmark has dismissed class-action claims by borrowers who alleged that their student loans were “unconscionable” because lenders manipulated their rates.

In a 68-page decision on Tuesday night, U.S. District Judge Naomi Reice Buchwald in Manhattan said it was not “substantively unreasonable” to incorporate Libor into the floating-rate portions of the borrowers’ loans, given that even sophisticated borrowers thought it a sufficiently reliable benchmark to use.

Judge Buchwald also said the lawsuits failed to allege that any manipulation by JPMorgan Chase & Co. and Bank of America Corp., the two lenders that were sued, increased the plaintiffs’ loan payments.

Lawyers for the plaintiffs did not immediately respond on Wednesday to requests for comment.

Short for London Interbank Offered Rate, Libor underpins hundreds of trillions of dollars of transactions, and is used to set rates on credit cards, student loans and mortgages. Banks use it to determine the cost of borrowing from one another. The rate is based on submissions by banks that sit on panels.

Investors and regulators have accused big banks of suppressing Libor during the financial crisis to boost earnings and make their finances appear healthier.

Judge Buchwald oversees litigation that began in 2011, and accused 16 banks of conspiring to manipulate Libor.

In March 2013, the judge dismissed what she called a “substantial portion” of the litigation, including federal antitrust claims justifying triple damages. Tuesday’s decision was her fifth extensive ruling addressing various claims.

Elsewhere in the decision, Judge Buchwald dismissed claims by lenders that complained about receiving artificially low interest payments on money they lent, and mortgagors who said they were forced to make artificially high payments.

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