Q: Do LIBOR transition resources only cover regulatory requirements?
A: No. The LIBOR transition plan resources provided by regulators, the FFIEC, the ARRC, and private organizations cover not only specific regulatory requirements, but also provide more general guidance, address best practices for creditors to assist consumers in the transition, and identify contractual issues creditors may face.
For example, the FFIEC’s joint statement noted that disclosure of account terms altered by the LIBOR transition should, and in some cases are required by law to, be communicated to borrowers in advance of a reference rate change to help them understand how a new reference rate affects their contractual principal and interest payments, APR, and other terms. The Mortgage Bankers Association has created this notice template for their members to help explain the LIBOR transition for ARM consumers, even when not regulatorily required.
In addition to best practices, public and private sector groups have also worked to address contractual issues posed by the LIBOR transition. For example, the ARRC has worked to develop recommended fallback contract language for consumer financial products impacted by the LIBOR transition. The ARRC’s recommended language and instructions for use are available on the ARRC’s website.
The Bureau encourages creditors and card issuers to consider adopting these practices, even if not required by the regulation or statute, to help provide clarity for all stakeholders and to minimize the impact of the transition on consumer payments.