WASHINGTON–Millions of consumers who hold loans with adjustable interest rates are going to be affected by the move away from Libor, a consumer group told Congress during a hearing this week.
Andrew Pizor, staff attorney at the National Consumer Law Center, testified before the U.S. Senate Committee on Banking, Housing, and Urban Affairs during “The Libor Transition: Protecting Consumers and Investors” hearing on the consumer and investor impact of transitioning from the Libor benchmark interest rate.
"The end of the Libor will affect millions of consumers whose adjustable interest rates are tied to that index,” Pizor said in his testimony. “But if Congress acts soon, most loans will convert to the safest replacement index–the Secured Overnight Financing Rate (SOFR)–and consumers will retain their rights under consumer protection laws if other lenders manipulate the situation to harm borrowers."
Libor, which once stood for London Interbank Offered Rate, is now more often referred to as “Libor.” Following a scandal and other questions around the validity as a benchmark rate, Libor is being phased out and regulators have told lenders that adjustable rate loans that are tied to the Libor index will need to use a different index, with SOFR the primary choice.