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NAFCU highlights CFPB's proposed rule to ease LIBOR transition, requests CU feedback
The CFPB earlier this month released a notice of proposed rulemaking in an effort to ease the transition away from the London Inter-bank Offered Rate (LIBOR) for consumers and regulated entities. In a new Regulatory Alert, NAFCU highlights key aspects of the rule that could impact credit unions and seeks feedback from members.
LIBOR is set to stop publishing after 2021 and the Secured Overnight Financing Rate (SOFR) has been identified as its alternative. The proposed rule, NAFCU notes, permits creditors for home equity lines of credit (HELOCs) and credit card issuers to transition existing accounts that use a LIBOR index to a replacement index on or after March 15, 2021, if certain conditions are met.
In the Regulatory Alert, NAFCU highlights that the proposed rule provides:
- new flexibility when selecting a replacement index;
- examples of indices that are substantially similar;
- an explanation about the content and timing of required disclosures; and
- technical updates to ensure, among other things, that card issuers are not burdened with compliance obligations that are impossible to discharge in a post LIBOR environment.
The proposed rule also provides additional clarity regarding the transitioning process after 2021, and addresses how the rate reevaluation provisions applicable to credit card accounts apply after the LIBOR index becomes unavailable.
Additionally, the Regulatory Alert includes a section-by-section analysis of the rule. Comments are due to NAFCU July 17. Comments are due to the CFPB Aug. 4.
The association will continue to keep credit unions informed of resources available to effectively transition away from LIBOR.