LegiStorm

Summary:
Highlights

GAO reviewed the Bureau of Consumer Financial Protection's (Bureau) new rule entitled "Facilitating the LIBOR Transition (Regulation Z)." GAO found that the final rule (1) amends Regulation Z, which implements the Truth in Lending Act (TILA), generally to address the anticipated sunset of the London Interbank Offered Rate (LIBOR), which is expected to be discontinued for most U.S. Dollar (USD) tenors in June 2023; (2) amends the open-end and closed-end provisions to provide examples of replacement indices for LIBOR indices that meet certain Regulation Z standards; (3) amends Regulation Z to permit creditors for home equity lines of credit (HELOCs) and card issuers for credit card accounts to transition existing accounts that use a LIBOR index to a replacement index on or after April 1, 2022, if certain conditions are met; (4) addresses change-in-terms notice provisions for HELOCs and credit card accounts and how they apply to accounts transitioning away from using a LIBOR index; and (5) amends Regulation Z to address how the rate reevaluation provisions applicable to credit card accounts apply to the transition from using a LIBOR index to a replacement index.Enclosed is our assessment of the Bureau's compliance with the procedural steps required by section 801(a)(1)(B)(i) through (iv) of title 5 with respect to the rule. If you have any questions about this report or wish to contact GAO officials responsible for the evaluation work relating to the subject matter of the rule, please contact Shari Brewster, Assistant General Counsel, at (202) 512-6398.





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B-333828

December 16, 2021

The Honorable Sherrod Brown
Chairman
The Honorable Patrick J. Toomey
Ranking Member
Committee on Banking, Housing, and Urban Affairs
United States Senate

The Honorable Maxine Waters
Chairwoman
The Honorable Patrick McHenry
Ranking Member
Committee on Financial Services
House of Representatives

Subject:  Bureau of Consumer Financial Protection: Facilitating the LIBOR Transition (Regulation Z)

Pursuant to section 801(a)(2)(A) of title 5, United States Code, this is our report on a major rule promulgated by the Bureau of Consumer Financial Protection (Bureau) entitled ?Facilitating the LIBOR Transition (Regulation Z)" (RIN:  3170-AB01).  We received the rule on December 8, 2021.  It was published in the Federal Register as a final rule on December 8, 2021.  86 Fed. Reg. 69716.  The effective date is April 1, 2022.

According to the Bureau, it is amending Regulation Z, which implements the Truth in Lending Act (TILA), generally to address the anticipated sunset of the London Interbank Offered Rate (LIBOR), which is expected to be discontinued for most U.S. Dollar (USD) tenors in June 2023.  See generally 15 U.S.C. 1601 et seq. (TILA); 12 C.F.R. part 1026 (Regulation Z).  The Bureau stated that some creditors currently use USD LIBOR as an index for calculating rates for open-end and closed-end products.  The Bureau also stated that it is amending the open-end and closed-end provisions to provide examples of replacement indices for LIBOR indices that meet certain Regulation Z standards.  The Bureau stated further that it is amending Regulation Z to permit creditors for home equity lines of credit (HELOCs) and card issuers for credit card accounts to transition existing accounts that use a LIBOR index to a replacement index on or after April 1, 2022, if certain conditions are met.  The Bureau noted that this final rule also addresses change-in-terms notice provisions for HELOCs and credit card accounts and how they apply to accounts transitioning away from using a LIBOR index.  The Bureau also noted that it is amending Regulation Z to address how the rate reevaluation provisions applicable to credit card accounts apply to the transition from using a LIBOR index to a replacement index.  Lastly, the Bureau stated that it is reserving judgment about whether to include references to a 1-year USD LIBOR index and its replacement index in various comments; the Bureau stated that it will consider whether to finalize comments proposed on that issue in a supplemental final rule once it obtains additional information.

Enclosed is our assessment of the Bureau?s compliance with the procedural steps required by section 801(a)(1)(B)(i) through (iv) of title 5 with respect to the rule.  If you have any questions about this report or wish to contact GAO officials responsible for the evaluation work relating to the subject matter of the rule, please contact Shari Brewster, Assistant General Counsel, at (202) 512-6398.


Shirley A. Jones
Managing Associate General Counsel

Enclosure

cc:  Edward J. Lovett
  Senior Congressional Liaison

ENCLOSURE

REPORT UNDER 5 U.S.C. § 801(a)(2)(A) ON A MAJOR RULE
ISSUED BY THE
BUREAU OF CONSUMER FINANCIAL PROTECTION
ENTITLED
?FACILITATING THE LIBOR TRANSITION (REGULATION Z)?
(RIN:  3170-AB01)

(i) Cost-benefit analysis

The Bureau of Consumer Financial Protection (Bureau) provided an analysis of the cost and benefits associated with this final rule.  The Bureau noted that because of data limitations, its analysis is generally a qualitative discussion of the benefits, costs, and impacts of the final provisions.  The Bureau?s analysis includes the establishment of a baseline against which the changes imposed by this final rule could be measured for the 1) potential benefits and cost to consumers and persons covered; 2) alternative provisions; 3) potential specific impacts on certain depository institutions and credit unions; and 4) potential specific impacts on consumer access to credit and on consumers in rural areas. 

(ii) Agency actions relevant to the Regulatory Flexibility Act (RFA), 5 U.S.C. §§ 603?605, 607, and 609

The Bureau certified that this final rule will not have a significant economic impact on a substantial number of small entities and, according to the Bureau, a Final RFA is not required for the final rule.

(iii) Agency actions relevant to sections 202?205 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. §§ 1532?1535

As an independent regulatory agency, the Bureau is not subject to the Act. 

(iv) Other relevant information or requirements under acts and executive orders

Administrative Procedure Act, 5 U.S.C. §§ 551 et seq.

The notice of proposed rulemaking associated with this final rule was published in the Federal Register on June 18, 2020.  85 Fed. Reg. 36938 (2020 Proposal).  According to the Bureau, it received approximately 30 comments.  The Bureau stated that approximately half of the comment letters were submitted by industry commenters, specifically banks and credit unions and their trade associations.  The Bureau also stated that commenters also included several consumer groups, a financial services education and consulting firm, and several individuals.  The Bureau stated further that it addressed comments in the section-by-section analysis of the final rule, but it did not address comments that were beyond the scope of the 2020 Proposal.  The Bureau explained that prior to the 2020 Proposal, it received feedback through both formal and informal channels.  The Bureau provided a brief summary of some of its engagement with industry, consumer groups, regulators, and other stakeholders regarding the transition away from the use of LIBOR indices prior to the 2020 Proposal.  The Bureau stated that it discusses, throughout the final rule, feedback received through these various channels if it was relevant to the final rule. 

Paperwork Reduction Act (PRA), 44 U.S.C. §§ 3501?3520

The Bureau stated that the information collections related to Regulation Z have been previously reviewed and approved by the Office of Management and Budget (OMB) and assigned OMB Control Number 3170?0015.  The Bureau has determined that this final rule does not impose any new or revise any existing recordkeeping, reporting, or disclosure requirements on covered entities or members of the public that would be a collection of information requiring approval by OMB under PRA.

Statutory authorization for the rule

The Bureau promulgated this final rule pursuant to sections 2601, 2603?2605, 2607, 2609, 2617, 3353, 5511, 5512, 5532, and 5581 of title 12, and sections 1601 et seq., of title 15, United States Code.

Executive Order No. 12866 (Regulatory Planning and Review)

As an independent regulatory agency, the Bureau is not subject to the Order. 

Executive Order No. 13132 (Federalism)

As an independent regulatory agency, the Bureau is not subject to the Order. 




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