CFPB Issues Final Libor Transition Rules
Highlights
- The Consumer Financial Protection Bureau (the Bureau) has issued final regulations to address concerns and reduce uncertainty regarding the impact on consumer credit products of the anticipated discontinuation of Libor (the London Interbank Offered Rate).
- The final rules, which provide specific guidance and clarity with respect to the transition from Libor to other identified reference rates in both open-end and closed-end consumer credit products, follow the issuance of proposed rules in June 2020.
- The Bureau has focused on key regulatory areas relating to the rules addressing replacement of the relevant rate for adjustable-rate credit products, disclosure of changes in terms and obligations of credit card issuers to reevaluate rates. The final rules are intended to provide certainty and flexibility for creditors while preserving transparency and other protections for consumers.
The Consumer Financial Protection Bureau (the Bureau) has issued final regulations (Final Regulations) to facilitate the transition away from Libor (the London Interbank Offered Rate) in the consumer credit market and to address concerns and reduce uncertainty regarding the impact of the discontinuation of Libor. The Final Regulations amend a number of provisions of Regulation Z (12 CFR Part 1026, which implements the Truth in Lending Act), providing specific guidance and relief with respect to the transition from Libor to other identified reference rates in both open-end and closed-end credit products. The Final Regulations generally become effective on April 1, 2022, and largely incorporate the regulations initially proposed by the Bureau in June 2020 (Proposed Regulations) with a number of modifications, all as more specifically described below. (See Holland & Knight's previous alert, "CFPB Issues Proposed Libor Transition Rules," June 18, 2020.)
Simultaneously with the release of the Final Regulations, the Bureau has published an updated set of Frequently Asked Questions (FAQ) on topics related to the transition away from Libor but which do not require amendment of Regulation Z.
The FAQ provides guidance with respect to the implications of Libor discontinuation on existing accounts and new originations under the applicable regulations, including the Final Regulations. It includes general information for creditors and consumers and a nonexclusive list of various regulatory provisions likely to be triggered by the transition. The FAQ also answers a series of specific questions, providing guidance with respect to notice, disclosure and other topics for adjustable-rate mortgage products and home equity lines of credit (HELOCs).
Background
Libor, one of the most widely used interest rate benchmarks in the world, underlies trillions of dollars of outstanding contracts in maturities ranging from overnight to more than 30 years. In 2013, against a backdrop of scandals regarding manipulation of Libor and decreased liquidity in interbank lending, the Financial Stability Board (FSB), a global body that monitors the world's financial systems, established the Official Sector Steering Group (OSSG), consisting of senior officials from central banks and regulatory authorities, to coordinate the review and reform of global interest rate benchmarks. In 2016, the OSSG launched a new initiative, focusing on the improvement of contract robustness to address concerns regarding discontinuation of certain key interest rate benchmarks. The OSSG invited the International Swaps and Derivatives Association Inc. (ISDA) to lead the initiative with respect to discontinuation and fallbacks in the derivatives market.
In 2014, the Federal Reserve System and the Federal Reserve Bank of New York jointly created the Alternative Reference Rates Committee (ARRC), consisting of a wide variety of market participants, trade organizations and ex officio regulators. One of the ARRC's initial objectives was to identify a "risk-free alternative" rate for U.S. dollar (USD) Libor and to develop a plan to implement the voluntary adoption of the alternative rate. In 2017, the ARRC identified the Secured Overnight Financing Rate (SOFR) as the replacement for USD Libor. SOFR, published daily and administered by the Federal Reserve Bank of New York, is based on more than $700 billion in overnight repurchase transactions secured by U.S. treasuries. ISDA subsequently agreed that SOFR would be the "risk-free" alternative to USD Libor for derivatives purposes as well.
In 2017, the United Kingdom's Financial Conduct Authority (FCA), the regulator of Libor, announced that it would no longer compel participating banks to provide submissions beyond 2021. Since that time, regulators around the world have issued continuous warnings, urging financial market participants to transition across all product classes to the risk-free rates in anticipation of the near-certain discontinuation of Libor.
In March 2021, the FCA announced that bank panels for the one-week and two-month USD Libor indices would end immediately after Dec. 31, 2021, and bank panels for the remaining USD Libor indices would end immediately after June 30, 2023. As a result, the FCA announced that publication of the one-week and two-month USD Libor indices would cease immediately after Dec. 31, 2021, and publication of the overnight and 12-month USD Libor indices would cease immediately after June 30, 2023. The FCA is considering using its powers to compel the publication of a synthetic form of the remaining USD Libor indices after June 30, 2023, but has made clear that any such publication would be non-representative and time-limited.
In the United States, Libor is a common benchmark rate for a wide range of adjustable-rate consumer credit products, including mortgages, credit cards, HELOCs, reverse mortgages and student loans. Typically, the adjustable interest rate is reset periodically on the basis of the selected benchmark (which, in the case of Libor, is tied to a specific tenor such as one-month Libor) plus a margin. As of the end of 2016, the ARRC estimated that there was $1.2 trillion of mortgage debt (including adjustable-rate mortgages, HELOCs and reverse mortgages) and $100 billion of non-mortgage debt tied to Libor. Many financial institutions have begun the process of transitioning new open-end and closed-end credit products away from Libor, but a large volume of existing products will be impacted by the discontinuation. The Final Regulations are intended to ease the transition and provide clarity for both creditors and consumers.
Description of Final Rules
The Bureau has focused on specific areas of Regulation Z that relate to the replacement of adjustable rates and the disclosures that accompany changes in terms. The Final Regulations are intended to create a roadmap for creditors to transition existing products away from Libor while maintaining sufficient protection for consumers.
The key areas covered by the Final Regulations are 1) clarification of existing regulations that allow creditors to replace rates for open-end and closed-end credit products, 2) introduction of new regulations allowing the specific replacement of Libor for HELOCs and credit cards on or after April 1, 2022, subject to certain conditions, 3) revisions to the notice and disclosure provisions regarding changes in terms for certain open-end credit products, and 4) revisions to the rate reevaluation provisions for credit card accounts. It is important to note that the Final Regulations do not override contractual limitations. As a result, creditors will need to comply with the Final Regulations in addition to, and not in lieu of, their contractual obligations to consumers.
Open-End Credit
The Final Regulations include a number of amendments to the provisions of Regulation Z that govern open-ended credit products. Under the applicable regulations, "open-end credit" is defined to include "consumer credit extended by a creditor under a plan in which: (i) The creditor reasonably contemplates repeated transactions; (ii) The creditor may impose a finance charge from time to time on an outstanding unpaid balance; and (iii) The amount of credit that may be extended to the consumer during the term of the plan (up to any limit set by the creditor) is generally made available to the extent that any outstanding balance is repaid." [Cite 12 CFR 1026.2(a)(20)]
Replacement Index and Margin
HELOCs
Existing Section 1026.40(f)(3)(ii) provides that a creditor in respect of a HELOC plan may "change the index and margin used under the plan if the original index is no longer available, the new index has an historical movement substantially similar to that of the original index, and the new index and margin would have resulted in an annual percentage rate substantially similar to the rate in effect at the time the original index became unavailable." Under the Final Regulations, this provision will become clause (3)(ii)(A) and be modified by 1) replacing the phrase "historical movement" with the phrase "historical fluctuations" and 2) adding a new sentence at the end thereof, consistent with existing commentary, specifying that if the replacement index is newly issued, it may be used if it and the replacement margin "will produce an annual percentage rate substantially similar to the rate in effect when the original index became unavailable."
While the clause described above would require creditors to wait until Libor is no longer available before replacing it, the Final Regulations will add a new Libor-specific Section 1026.40(f)(3)(ii)(B), which will allow creditors to replace a Libor index and margin on or after April 1, 2022, even if Libor is still available, subject to terms described below.
Pursuant to the new clause (3)(ii)(B), a creditor could change the Libor index and margin to a replacement index and replacement margin on or after April 1, 2022, as long as "historical fluctuations in the LIBOR index and replacement index were substantially similar, and as long as the replacement index value in effect on October 18, 2021, and replacement margin will produce an annual percentage rate substantially similar to the rate calculated using the LIBOR index value in effect on October 18, 2021, and the margin that applied to the variable rate immediately prior to the replacement of the LIBOR index used under the plan." The provision will further allow a creditor to use a newly established replacement index "if the replacement index value in effect on October 18, 2021, and the replacement margin will produce an annual percentage rate substantially similar to the rate calculated using the LIBOR index value in effect on October 18, 2021, and the margin that applied to the variable rate immediately prior to the replacement of the LIBOR index used under the plan."
The Final Regulations include one additional exception to the preceding calculations that was not included in the Proposed Regulations: "if the replacement index is the spread-adjusted index based on SOFR recommended by the Alternative Reference Rates Committee for consumer products to replace the 1-month, 3-month, 6-month, or 1-year U.S. Dollar LIBOR index, the creditor must use the index value on June 30, 2023, for the LIBOR index and, for the SOFR-based spread-adjusted index for consumer products, must use the index value on the first date that index is published, in determining whether the annual percentage rate based on the replacement index is substantially similar to the rate based on the LIBOR index."
These revisions will be further clarified and supplemented by commentary and examples provided by the Bureau pursuant to the Final Regulations. In particular, the Bureau has determined that effective April 1, 2022, both the prime rate and certain ARRC-endorsed SOFR rates for consumer products have "historical fluctuations that are substantially similar" to certain replaced Libor rates. This determination satisfies one of the key requirements in both clauses (3)(ii)(A) and (3)(ii)(B) regarding the replacement index and will simplify the process of determining compliance with those provisions. A new comment clarifies relevant factors in determining whether a replacement index has "historical fluctuations substantially similar" to the LIBOR index being replaced. The new comment provides a list of such relevant factors including, but not limited to, whether "(1) the movements over time are substantially similar; and (2) the consumers' payments using the replacement index compared to payments using the LIBOR index are substantially similar if there is sufficient data for this analysis."
One additional comment provides further guidance with respect to the new clause (3)(ii)(B), specifying that "if a creditor uses the SOFR-based spread-adjusted index recommended by the ARRC for consumer products to replace the 1-month, 3-month, or 6-month U.S. Dollar LIBOR index as the replacement index and uses as the replacement margin the same margin that applied to the variable rate immediately prior to the replacement of the LIBOR index used under the plan, the creditor will be deemed to be in compliance with the condition … that the replacement index and replacement margin would have resulted in an annual percentage rate substantially similar to the rate calculated using the LIBOR index."
The revisions to clause (3)(ii)(A) and the addition of clause (3)(ii)(B) will give creditors the option to replace Libor under either provision as long as the relevant conditions are satisfied. One important distinction between the two provisions relates to the timing of the determination of whether the new rate is "substantially similar" to the old rate. Under clause (3)(ii)(A), the timing is based on the date on which Libor becomes unavailable. Under clause (3)(ii)(B), the timing is based on rates in effect as of Oct. 18, 2021, and the margin in effect immediately prior to replacement, which will allow creditors to transition to replacement rates sooner than if they had to wait for Libor to become unavailable.
As noted above, the Bureau makes clear that these provisions do not excuse creditors from satisfying the contractual requirements governing their HELOC plans. Creditors will remain subject to any contractual restrictions on the timing or selection of any replacement of Libor as the relevant index. The Final Regulations include examples which provide some commentary on the interaction between the regulations and hypothetical contract terms.
Credit Cards
Existing Section 1026.55(b)(2) permits a credit card issuer to increase an annual percentage rate when "(i) The annual percentage rate varies according to an index that is not under the card issuer's control and is available to the general public; and (ii) The increase in the annual percentage rate is due to an increase in the index." This provision is supplemented by Comment 55(b)(2)-6, which provides that a card issuer may change the index and margin used to determine the annual percentage rate (APR) "if the original index becomes unavailable, as long as historical fluctuations in the original and replacement indices were substantially similar, and as long as the replacement index and margin will produce a rate similar to the rate that was in effect at the time the original index became unavailable. If the replacement index is newly established and therefore does not have any rate history, it may be used if it produces a rate substantially similar to the rate in effect when the original index became unavailable."
The Final Regulations will move the comment set forth above to a new Section 1026.55(b)(7)(i) and add a new clause (b)(7)(ii). Similar to the changes described above with respect to HELOCs, the new clause (b)(7)(ii) will create a new Libor-specific replacement right for card issuers, allowing issuers to convert from Libor and increase an APR on or after April 1, 2022, "as long as historical fluctuations in the LIBOR index and replacement index were substantially similar, and as long as the replacement index value in effect on October 18, 2021, and replacement margin will produce an annual percentage rate substantially similar to the rate calculated using the LIBOR index value in effect on October 18, 2021, and the margin that applied to the variable rate immediately prior to the replacement of the LIBOR index used under the plan." As with the HELOC terms, a newly established index may be used if "the replacement index value in effect on October 18, 2021, and the replacement margin will produce an annual percentage rate substantially similar to the rate calculated using the LIBOR index value in effect on October 18, 2021, and the margin that applied to the variable rate immediately prior to the replacement of the LIBOR index used under the plan."
The Final Regulations include one additional exception to the preceding calculations that was not included in the Proposed Regulations: "if the replacement index is the spread-adjusted index based on SOFR recommended by the Alternative Reference Rates Committee for consumer products to replace the 1-month, 3-month, 6-month, or 1-year U.S. Dollar LIBOR index, the card issuer must use the index value on June 30, 2023, for the LIBOR index and, for the SOFR-based spread-adjusted index for consumer products, must use the index value on the first date that index is published, in determining whether the annual percentage rate based on the replacement index is substantially similar to the rate based on the LIBOR index."
The Final Regulations provide additional commentary and examples to further clarify and supplement the changes to the regulations. In particular, the Bureau has determined that effective April 1, 2022, both the prime rate and certain ARRC-endorsed SOFR rates for consumer products have "historical fluctuations that are substantially similar" to certain replaced Libor rates. This determination satisfies one of the key requirements in both clauses (b)(7)(i) and (b)(7)(ii) regarding the replacement index and will simplify the process of determining compliance with those provisions. A new comment clarifies relevant factors in determining whether a replacement index has "historical fluctuations substantially similar" to the LIBOR index being replaced. The new comment provides a list of such relevant factors including, but not limited to, whether "(1) the movements over time are substantially similar; and (2) the consumers' payments using the replacement index compared to payments using the LIBOR index are substantially similar if there is sufficient data for this analysis."
One additional comment provides further guidance with respect to the new clause (b)(7)(ii), specifying that "if a card issuer uses the SOFR-based spread-adjusted index recommended by the ARRC for consumer products to replace the 1-month, 3-month, or 6-month U.S. Dollar LIBOR index as the replacement index and uses as the replacement margin the same margin that applied to the variable rate immediately prior to the replacement of the LIBOR index used under the plan, the card issuer will be deemed to be in compliance with the condition … that the replacement index and replacement margin would have resulted in an annual percentage rate substantially similar to the rate calculated using the LIBOR index."
The regulations in clauses (b)(7)(i) and (b)(7)(ii) will give card issuers the option to replace Libor under either provision, as long as the relevant conditions are satisfied. As with the HELOC regulations, an important distinction between the two provisions relates to the timing of the determination of whether the new rate is "substantially similar" to the old rate. Under clause (b)(7)(i), the timing is based on the date on which Libor becomes unavailable. Under clause (b)(7)(ii), the timing is based on rates in effect as of Oct. 18, 2021, and the margin in effect immediately prior to replacement, which will allow card issuers to transition to replacement rates sooner than if they had to wait for Libor to become unavailable.
As noted above, the Bureau makes clear that these provisions do not excuse creditors from satisfying the contractual requirements governing their credit card plans. Card issuers will remain subject to any contractual restrictions on the timing or selection of any replacement of Libor as the relevant index. The Final Regulations include examples that provide some commentary on the interaction between the regulations and hypothetical contract terms.
Disclosure Requirements
HELOCs
Pursuant to existing Section 1026.9(c)(1), HELOC creditors are required to provide notice of any change in certain specified terms, including the replacement of the index or change in the components of the adjustable rate, at least 15 days prior to the effective date of the change (unless such change in consented to by the consumer). Section 1026.9(c)(1)(ii) provides an exception to such notice for changes involving a reduction of any component of a finance or other charge – creditors are ordinarily not required to notify customers of reductions to the components of the adjustable rate. Under the Final Regulation, this exception would not apply to a reduction of the margin which occurs on or after October 1, 2022 where a Libor index is replaced pursuant to revised Section 1026.40(f)(3)(ii)(A) or (B) (each as described above). As a result, creditors replacing a Libor rate on or after Oct. 1, 2022, pursuant to the revised Section 1026.40(f)(3)(ii)(A) or (B) will be required to provide notice not only of the index replacement but also any change in the margin, even if the margin is decreased. With respect to replacements which occur prior to Oct. 1, 2022, creditors have the option to provide notice of the reduction of the margin but are not obligated to do so. The Bureau believes that this change will provide additional transparency for customers with respect to the determination of the adjustable rate going forward while only marginally increasing the burden on the creditor. In addition, creditors are likely to want to provide this information to avoid confusion and because it is beneficial to the customers.
Non-HELOC Credit
Existing Section 1026.9(c)(2)(i)(A) requires creditors (other than HELOC creditors) to provide notice of any "significant change in account terms," including the replacement of the index or change in the components of the adjustable rate, at least 45 days prior to the effective date of the change (unless such change in consented to by the consumer). Section 1026.9(c)(2)(v) provides an exception to such notice for changes involving a reduction of any component of a finance or other charge – creditors are ordinarily not required to notify customers of reductions to the components of the adjustable rate. Under the Final Regulation, this exception does not apply to a reduction of the margin which occurs on or after Oct. 1, 2022, where a Libor index is replaced pursuant to the revised Section 1026.55(b)(7)(i) or (ii) (each as described above). As a result, creditors replacing a Libor rate on or after Oct. 1, 2022, pursuant to the revised Section 1026.55(b)(7)(i) or (ii) will be required to provide notice not only of the index replacement, but also any change in the margin, even if the margin is decreased. With respect to replacements which occur prior to Oct. 1, 2022, creditors have the option to provide notice of the reduction of the margin, but are not obligated to do so. As with the similar revision for HELOCs, the Bureau believes that this change will provide additional transparency for customers with respect to the determination of the adjustable rate going forward, while only marginally increasing the burden on the creditor. In addition, creditors are likely to want to provide this information to avoid confusion and because it is beneficial to the customers.
Reevaluation Provisions
Under existing Section 1026.59(a)(1), if a credit card issuer "increases an annual percentage rate that applies to a credit card account under an open-end (not home-secured) consumer credit plan, based on the credit risk of the consumer, market conditions, or other factors, or increased such a rate on or after Jan. 1, 2009, and 45 days' advance notice of the rate increase is required pursuant to § 1026.9(c)(2) or (g)," the card issuer is required to periodically reevaluate certain factors and, based on such review, reduce the annual percentage rate applicable to the customer's account, as appropriate.
In the release accompanying the Final Regulations (the Release), the Bureau indicates that the industry has raised concerns about the application of Section 1026.59(a)(1) to the transition away from Libor. The Release suggests that the transition from a Libor index to a different index pursuant to the revised Section 1026.55(b)(7)(i) or Section 1026.55(b)(7)(ii) (each as described above) may constitute a rate increase that would subject an account to the reevaluation requirements. Existing Section 1026.59(h) provides two exceptions to the reevaluation requirement set forth in Section 1026.59(a)(1), but neither exception provides any relief from these concerns.
The Final Regulations will add a third exception as clause (3) under Section 1026.59(h). This exception would expressly state that the reevaluation requirements of Section 1026.59(a)(1) do not apply to an increase that occurs as a result of the transition from a Libor rate as long as the change occurs in accordance with Section 1026.55(b)(7)(i) or (ii). The new exception is intended to clarify the obligations of credit card issuers and encourage issuers to transition away from Libor sooner than they might otherwise if it would trigger reevaluation obligations. A comment to this new exception clarifies that the exception does not apply to rate increases already subject to Section 1026.59 prior to the transition from the Libor rate to another index in accordance with Section 1026.55(b)(7)(i) or (ii).
The terms of existing Section 1026.59 raise one additional concern with respect to the transition away from Libor. Section 1026.59(f) provides conditions under which a card issuer's existing obligation to reevaluate the factors pursuant to Section 1026.59(a)(1) may be terminated. Under that Section, the issuer's obligation to reevaluate will cease if the issuer reduces the annual percentage rate "to the rate applicable immediately prior to the increase, or, if the rate applicable immediately prior to the increase was a variable rate, to a variable rate determined by the same formula (index and margin) that was used to calculate the rate applicable immediately prior to the increase." The provision, however, provides no guidance in the event that the index that was previously used to calculate the rate no longer exists. This situation would arise if an issuer was subject to Section 1026.59 prior to the conversion away from Libor – the subsequent unavailability of Libor would make it impossible for an issuer to satisfy the conditions to cease reevaluation.
A new Section 1026.59(f)(3) will create a new condition to allow the issuer to cease reevaluation. Under that provision, an issuer can cease reevaluation if, "in the case where the rate applicable immediately prior to the increase was a variable rate with a formula based on a LIBOR index, the card issuer reduces the annual percentage rate to a rate determined by a replacement formula that is derived from a replacement index value on October 18, 2021, plus replacement margin that is equal to the LIBOR index value on October 18, 2021, plus the margin used to calculate the rate immediately prior to the increase (previous formula)." In addition, an issuer would be required to satisfy the conditions set forth in § 1026.55(b)(7)(ii) for selecting a replacement index. The new provision will be effective as of April 1, 2022. By providing a measurement against the Oct. 18, 2021, rates, the new condition provides issuers with a method to cease reevaluation even after Libor has been discontinued. The Bureau had previously noted that the reference to a specific date for comparison provides a "static and consistent reference point by which to determine the formula," and is also consistent with the index values used in the transition permitted under the revised Section 1026.55(b)(7)(ii).
The Final Regulations include one additional exception to the preceding calculations that was not included in the Proposed Regulations: "if the replacement index is the spread-adjusted index based on SOFR recommended by the Alternative Reference Rates Committee for consumer products to replace the 1-month, 3-month, 6-month, or 1-year U.S. Dollar LIBOR index, the card issuer must use the index value on June 30, 2023, for the LIBOR index and, for the SOFR-based spread-adjusted index for consumer products, must use the index value on the first date that index is published, as the index values to use to determine the replacement formula."
Additional new comments to the rule will provide specific examples of the application of Section 1026.59(f)(3).
Technical Edits
In addition to the changes described above, the Final Regulations include a number of technical edits to the open-end credit regulations. The revisions generally replace references to Libor with references to SOFR and include corresponding and conforming changes.
Closed-End Credit
The Final Regulations also provide certain revisions specific to closed-end credit. Closed-end credit generally includes all forms of credit other than open-end credit.
Refinancings
Pursuant to existing Section 1026.20, a refinancing of closed-end credit triggers certain disclosure and other requirements. Section 1026.20(a) and its related commentary provide a number of clarifications and exceptions regarding specific types of actions that would or would not constitute a refinancing. In particular, Comment 20(a)-3.ii.B provides that a refinancing results if the creditor "adds a variable-rate feature to the obligation," but clarifies that "a creditor does not add a variable-rate feature by changing the index of a variable-rate transaction to a comparable index, whether the change replaces the existing index or substitutes an index for one that no longer exists."
The Bureau proposes to conclude that certain applicable ARRC-endorsed SOFR rates would constitute "comparable indexes" to the Libor rates being replaced. The Final Regulations will add to Comment 20(a)-3.ii.B an illustrative example which would specify that a creditor does not add a variable-rate feature (and, therefore, does not trigger a refinancing) by changing the index of a variable-rate transaction "from the 1-month, 3-month or 6-month LIBOR index to the spread-adjusted index based on SOFR recommended by the ARRC for consumer products to replace the 1-month, 3-month or 6-month USD LIBOR index respectively because the replacement index is a comparable index to the corresponding USD LIBOR index." This determination would simplify the analysis for creditors while maintaining the spirit of the regulation to protect consumers. The Proposed Regulations also included one-year USD Libor, which has been removed from the Final Regulations for further consideration by the Bureau.
The Final Regulations include additional modifications to the related comments to clarify relevant factors in determining whether a replacement index is "comparable" to the Libor index being replaced. The new Comment 20(a)-3.iv provides a list of such relevant factors including, but not limited to, whether "(1) the movements over time are comparable; (2) the consumers' payments using the replacement index compared to payments using the LIBOR index are comparable if there is sufficient data for this analysis; (3) the index levels are comparable; (4) the replacement index is publicly available; and (5) the replacement index is outside the control of the creditor."
Technical Edits
In addition to the changes above, the Final Regulations include a number of technical edits to the closed-end credit regulations. These revisions generally replace references to Libor with references to SOFR and include corresponding and conforming changes.
Other Rates
The Bureau noted in the Release that various commenters had asked the Bureau to consider including safe-harbor determinations regarding certain other alternative rates, including AMERIBOR® (American Interbank Offered Rate) rates, the effective federal funds rate and Constant Maturity Treasury (CMT) rates. The Bureau declined to include such other rates, noting that "the final rule does not disallow the use of other replacement indices if they comply with Regulation Z." The Bureau further explained that "there may be other comparable indices that creditors may use as replacements for the various tenors of LIBOR."
Conclusion
The final rules set forth in the Final Regulations will take effect on April 1, 2022, except that the rules relating to the change-in-term disclosure requirements for HELOCs and credit cards will become mandatory as of Oct. 1, 2022.
For more information on the Final Regulations and how they could impact your organization, please contact the authors.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.