§5803 Libor Contracts

Summary

On the LIBOR replacement date, the rate the Board picks becomes the official replacement for any LIBOR contract that has no fallback or whose fallback names neither a specific replacement nor the person who makes the choice. Fallback language that points to a replacement based on any LIBOR value, or that requires someone to poll banks or ask for quotes, will not work on that date. If a contract lets a particular person (the “determining person”) pick a replacement, that person may choose the Board’s rate. That choice is final, must be made by the earlier of the LIBOR replacement date or the last date allowed in the contract, and it applies from the LIBOR replacement date forward. If no choice is made by that time, the Board’s rate becomes the replacement. When the Board’s rate becomes the replacement, any small changes needed to use the new rate automatically become part of the contract, and the person who calculates payments does not need anyone’s consent to make those changes. The Board will add the proper tenor spread adjustment to its replacement rate for each contract type. For consumer loans, the Board will phase in that spread over 1 year, moving linearly from the day-before difference to the final spread, and after 1 year the final spread applies. The law does not change contracts that say they are not covered, or contracts that already name a non-LIBOR-based replacement (except as noted above), nor does it override existing caps, floors, modifiers, required consumer notices about changes in terms, rules about credit-card rate reevaluations, or existing rights and agency powers under federal consumer financial law.