NCUA Joins With Other Agencies in Statement on LIBOR

WASHINGTON– NCUA has joined with four other federal financial regulatory agencies and state credit union regulators in issuing a statement that the use of United States Dollar LIBOR (USD LIBOR) panels will end on June 30, 2023. 

“The statement reiterates the agencies’ expectations that financial institutions with USD LIBOR exposure should complete their transition of remaining LIBOR contracts as soon as practicable. Accordingly, the (agencies are) urging banks and nonbanks alike to continue their efforts to adequately prepare for the sunset of USD LIBOR,” the agencies said in releasing the statement.

The statement notes that the financial services industry uses USD LIBOR as a reference interest rate for many consumer financial products, including adjustable rate mortgage loans, reverse mortgages, home equity lines of credit, credit cards, and student loans. 

“The approaching discontinuation of USD LIBOR in June 2023 presents numerous consumer protection, financial, litigation, and operational risks,” the statement notes. “For instance, if financial institutions do not issue required disclosures, consumers may not know when the transition from USD LIBOR will occur or how the interest rates they pay will be calculated.”
The agencies, which include the CFPB, said they are committed to helping both banks and nonbanks transition affected consumers from USD LIBOR in a transparent and orderly manner.

NCUA Publishes Letter

NCUA noted additional guidance on LIBOR Transition Plans can be found in the May 2021 Letter to Credit Unions 21-CU-03, LIBOR Transition.

For its part, the CFPB noted that in October 2019 and December 2021, the CFPB published blog posts discussing the transition away from USD LIBOR to help consumers understand this market-wide change. In June 2020, the CFPB released an updated Consumer Handbook on Adjustable-Rate Mortgages to help consumers better understand these products and how their payments can change over time.

Additional Reminders

In addition, on Dec. 7, 2021, the CFPB reminded it finalized a rule revising Regulation Z (Truth in Lending Act) to facilitate the transition away from the USD LIBOR interest rate index for consumer loans. The rule establishes requirements for how creditors must select replacement indices for existing USD LIBOR-linked consumer loans after April 1, 2022. 

The CFPB also said it is currently assessing any further steps it needs to take as a result of the subsequent Adjustable Interest Rate Act and the Federal Reserve Board’s implementing regulation identifying benchmark rates based on the Secured Overnight Financing Rate (SOFR) to replace USD LIBOR in certain consumer contracts.