LIBOR CFPB FAQ All Products 2 – Are there specific regulatory or statutory requirements creditors need to consider as they prepare to transition impacted consumers away from the LIBOR index?

Compliance > Regulation Z - TILA > LIBOR Transition
Q:  Are there specific regulatory or statutory requirements creditors need to consider as they prepare to transition impacted consumers away from the LIBOR index?
 
A:   Yes. Creditors have regulatory and statutory requirements impacted or triggered by the LIBOR transition for both new and existing consumer accounts. For certain consumer financial products and services, statutes and regulations may have specific requirements that are triggered or impacted by the LIBOR transition and any accompanying index change. For example, Regulation Z has requirements for certain products regarding consumer notification of a change to the contract terms, limits on when the index can change, and requirements for selecting an appropriate replacement index. Additionally, creditors will want to be cognizant of other standard regulatory and statutory requirements, such as prohibitions in the Dodd-Frank Act on unfair, deceptive, or abusive acts or practices, and continue to follow their normal business practices in assessing and mitigating risk in those areas while completing the LIBOR transition.

The following list highlights certain Bureau regulatory provisions impacted by the LIBOR transition. Creditors and card issuers of variable-rate products using LIBOR as an index will want to consider these identified provisions, as well as other federal and state requirements and guidance, when making any LIBOR-related changes to the consumer’s index or other loan terms.

CLOSED-END PRODUCTS AND SERVICES

1) Adjustable-Rate Mortgages:
 
  • Origination disclosure requirements for the adjustable-rate loan program disclosure, particularly the loan program example (12 CFR § 1026.19(b)(2));
  • Refinancing provisions governing whether changing to a particular replacement index is considered a refinancing, and triggering, for example, new transaction disclosures and new ATR/QM determinations, as applicable (12 CFR § 1026.20(a); Comments 20(a)-3.ii and 3.iv);
  • Servicing disclosure requirements on the content and format of mortgage servicing notices, such as interest rate adjustment notices and periodic statements (12 CFR §§ 1026.20(c), (d), and .41, as well as Appendix H-4(D)); and
  • For alternative mortgage transaction ARMs, limitations on increasing the interest rate or finance charge (12 CFR § 1004.4(a)(2)).
     
2) Private Student Loans:
 
  • Refinancing provisions governing whether changing to a particular replacement index is considered a refinancing and triggering, for example, new transaction disclosures, as applicable (12 CFR § 1026.20(a); Comments 20(a)-3.ii and 3.iv).
     
3) Other Closed-End Products and Services (e.g., Auto Loans, Personal Installment Loans):
 
  • Refinancing provisions governing whether changing to a particular replacement index is considered a refinancing and triggering, for example, new transaction disclosures, as applicable (12 CFR § 1026.20(a); Comments 20(a)-3.ii and 3.iv).

 
OPEN-END PRODUCTS AND SERVICES

1) Credit Cards:
  • Index change requirements, including limitations on changing the index used to determine the annual percentage rate (APR) for variable rate accounts and the requirements for identifying a replacement index, as well as LIBOR-specific provisions (12 CFR § 1026.55(b)(2) and 55(b)(7));
  • Change-in-terms notice requirements (12 CFR § 1026.9(c)(2)); and
  • Reevaluations of rate increases and the index used as a benchmark for comparison, including LIBOR-specific exceptions (12 CFR § 1026.59).

2) HELOCs (including Open-End Reverse Mortgages):
 
  • Index change requirements, including limitations on changing an index and the requirements for identifying a replacement index, as well as LIBOR-specific provisions (12 CFR § 1026.40(f)(1) and 40(f)(3)(ii));
  • Change-in-terms notice requirements (12 CFR § 1026.9(c)(1));
  • Application Disclosure requirements, particularly the loan program example (12 CFR § 1026.40(d)(12)); and
  • For alternative mortgage transaction HELOCs, limitations on increasing the interest rate or finance charge (12 CFR § 1004.4(a)).
     
3) Other Open-End (not Home-Secured) Products and Services (e.g., overdraft lines of credit):
 
  • Change-in-terms notice requirements (12 CFR § 1026.9(c)(2)).

These regulatory provisions are discussed in greater detail in the FAQs below.
 
 
This Q&A was created based on information from the Consumer Financial Protection Bureau’s website (which may be updated from time to time) that provides Answers to Frequently Asked Questions on the Transition Away from LIBOR.  This information may be found here:  https://files.consumerfinance.gov/f/documents/cfpb_libor-transition_faqs.pdf
 

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