§5803 Libor Contracts

Summary

On the LIBOR replacement date, the Board-selected benchmark replacement becomes the new benchmark for any LIBOR contract that either has no fallback rules or has fallback rules that do not name a specific replacement or a person to decide. Any fallback language that tries to pick a replacement based on LIBOR values (except to adjust for the difference) or that tells someone to poll banks for quotes will be ignored. A person named to pick the replacement may choose the Board-selected benchmark. That choice is final, must be made by the earlier of the LIBOR replacement date or the last date the contract allows for choosing, and will apply to all calculations on or after the LIBOR replacement date. If no such person chooses by that date, the Board-selected benchmark replacement will apply automatically. Changes needed to use the new benchmark become part of the contract, and the person doing the math does not need anyone’s permission to make those changes. On the LIBOR replacement date, the Board will also add the relevant tenor spread adjustment to the Board-selected benchmark for each category of LIBOR contract it identifies. For consumer loans, there is a 1-year transition starting on the LIBOR replacement date where the adjustment moves linearly from the day-before-LIBOR difference to the full tenor spread adjustment; after one year the full tenor spread adjustment applies. Nothing in this chapter changes written agreements that opt out, fallback provisions that name replacements not based on LIBOR, contracts where a deciding person does not pick the Board-selected benchmark (except as already noted), existing caps/floors/modifiers/spreads tied to LIBOR, certain consumer notice and credit-card rules, or rights and agency powers under Federal consumer financial law, except as provided in section 5804(c).