The Consumer Financial Protection Bureau finalized a rule facilitating the transition away from the LIBOR interest rate index for consumer financial products.
Details: The final rule establishes requirements for how creditors must select replacement indexes for existing LIBOR-linked consumer loans after April 1, 2022. It includes provisions requiring creditors to choose an index comparable to LIBOR when changing the index of a variable-rate loan.
SOFR: The rule identifies certain Secured Overnight Financing Rate-based indexes recommended by the Alternative Reference Rates Committee to replace various USD LIBOR tenors.
Background: No new financial contracts may reference LIBOR as the relevant index after the end of 2021. Starting in June 2023, LIBOR can no longer be used for existing financial contracts.
More: An ICBA blog post details the end of LIBOR and the impact of the pending transition on community banks.
