Bureau issues final rule Facilitating the LIBOR Transition

The CFPB has published in today's Federal Register a Final Rule and official interpretations amending Regulation Z, generally to address the anticipated sunset of LIBOR, which is expected to be discontinued for most U.S. Dollar (USD) tenors in June 2023.

The Bureau is amending the open-end and closed-end provisions to provide examples of replacement indices for LIBOR indices that meet certain Regulation Z standards. The Bureau also is amending Regulation Z to permit creditors for home equity lines of credit (HELOCs) and card issuers for credit card accounts to transition existing accounts that use a LIBOR index to a replacement index on or after April 1, 2022, if certain conditions are met.

The final rule also addresses change-in-terms notice provisions for HELOCs and credit card accounts and how they apply to accounts transitioning away from using a LIBOR index. In addition, the Bureau is amending 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 Bureau is reserving judgment about whether to include references to a 1-year USD LIBOR index and its replacement index in various comments; the Bureau will consider whether to finalize comments proposed on that issue in a supplemental final rule once it obtains additional information.

The final rule effective and mandatory compliance date is generally effective April 1, 2022; changes to two sample forms in Appendix H will be effective October 1, 2023. The mandatory compliance date for two open-end change-in-terms notice requirements is October 1, 2022.

The Bureau also update its LIBOR Transitions FAQs to reflect the new final rule.

• CFPB press release
• Statement by CFPB Director Chopra
• Unofficial Redline of the rule
• Executive Summary

Editor's Note: BankersOnline's Regulation Z pages, except for those in Appendix H, have been updated with the final rule.