The Consumer Financial Protection Bureau joined four other federal financial regulatory agencies and state bank and credit union regulators in issuing a statement highlighting the risks posed by the discontinuation of the London Interbank Offered Rate (LIBOR).
The interagency statement identifies specific actions financial institutions can consider in preparation for the elimination of LIBOR-based loans. Among those actions include developing and implementing a transition plan for communicating with consumers and including fallback language that defines a fallback reference rate. Finally, the interagency statement includes clarification on the meaning of certain key terms, factors industry should consider when selecting alternative rates, and expectations for fallback language.
On June 4, 2020, the CFPB issued a Notice of Proposed Rulemaking and FAQs relating to the LIBOR transition. The CFPB is continuing work on a final rule to address the anticipated expiration of LIBOR and expects to issue it in January 2022. The FAQs pertain to compliance with existing CFPB regulations for consumer financial products and services impacted by the anticipated LIBOR discontinuation and resulting need to transition to other indices.