LIBOR CFPB FAQ All Products 3 – What is the Bureau’s LIBOR Transition Rule?

Compliance > Regulation Z - TILA > LIBOR Transition
Q:  What is the Bureau’s LIBOR Transition Rule?
A:   On June 4, 2020, in anticipation of the LIBOR sunset date, the Bureau published a proposed rule, which submitted amendments to certain existing Regulation Z requirements to facilitate the LIBOR transition for public comment.

On December 7, 2021, the Bureau finalized that Rule, largely as proposed. In the final rule (the LIBOR Transition Rule), the Bureau:
  • Amended open-end and closed-end provisions to provide examples of replacement indices for LIBOR indices that meet certain Regulation Z conditions.
  • Amended Regulation Z to permit HELOC creditors and credit card issuers to transition existing accounts that use a LIBOR index to a replacement index on or after April 1, 2022, if certain conditions are met.
  • Amended HELOC and credit card change-in-terms notice provisions and explained how they apply to accounts transitioning away from using a LIBOR index.
  • Amended Regulation Z to address how the rate reevaluation provisions applicable to credit card accounts apply to the transition from using a LIBOR index to a replacement index.

The LIBOR Transition Rule is effective April 1, 2022. For certain change-in-terms notice provisions, creditors and card issuers can begin complying on April 1, 2022, although mandatory compliance does not begin until October 1, 2022. Additionally, for the changes to Appendix H-4(D) to the sample mortgage servicing interest rate adjustment notices, a creditor (or assignee or servicer, as applicable) may optionally rely on either a format substantially similar to the legacy sample forms or a format substantially similar to the updated sample forms beginning April 1, 2022, through September 30, 2023, to be deemed in compliance with the content and format requirements for the notices. However, beginning on October 1, 2023, these entities may only rely on a form substantially similar to the updated sample forms to be deemed in compliance with the content and format requirements for the notices.
Note that the examples added to Regulation Z in the LIBOR Transition Rule are meant only to illustrate indices that the Bureau considers comparable to specific tenors of LIBOR for purposes of the closed-end refinancing provision in Regulation Z or that the Bureau has determined meet certain substantial similarity requirements when compared to specific LIBOR tenors for purposes of certain open-end requirements in Regulation Z. In certain circumstances, their use can deem a creditor compliant with certain Regulation Z requirements. However, they are not exhaustive of the indices that may meet these requirements when compared to LIBOR, and other replacement indices may also be compliant. The LIBOR Transition Rule provides a non-exhaustive list of factors for certain provisions that a creditor may consider if choosing to select a replacement index that is not an example in the Rule.

The LIBOR Transition Rule can be found here. A plain language executive summary of the rule can be found here.
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:

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