An interim final rule that, effective May 15, revises Regulation Z, which implements the Truth in Lending Act (TILA), in conformance with the transition away from the London Interbank Offered Rate (LIBOR) as an index for setting interest rates for consumer loans is out for public comment until June 12.
The interim final rule by the Consumer Financial Protection Bureau (CFPB) was announced in late April and published Thursday in the Federal Register.
The CFPB said its rule amends a regulation adopted in 2021 to facilitate the wind down of the use of LIBOR, which became defunct at the beginning of 2022. Loans and other contracts in force that were still using LIBOR when that rule took effect have until June 30 to find an alternative rate. The Federal Reserve developed the Secured Overnight Financing Rate (SOFR) as one alternative; that rate has been widely used to replace LIBOR.
The bureau said its interim final rule will conform Reg Z (designed to protect consumers against misleading and predatory lending practices) with the 2021 LIBOR Act and the Federal Reserve Board’s implementing regulation. It will do that, the bureau said, by, among other things, adding references to the SOFR-based replacement for the 12-month LIBOR index.
Reg lookup: Facilitating the LIBOR Transition Consistent With the LIBOR Act (Regulation Z)