[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4616 Referred in Senate (RFS)]
<DOC>
117th CONGRESS
1st Session
H. R. 4616
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
December 9, 2021
Received; read twice and referred to the Committee on Banking, Housing,
and Urban Affairs
_______________________________________________________________________
AN ACT
To deem certain references to LIBOR as referring to a replacement
benchmark rate upon the occurrence of certain events affecting LIBOR,
and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Adjustable Interest Rate (LIBOR) Act
of 2021''.
SEC. 2. FINDINGS AND PURPOSE.
(a) Findings.--The Congress finds that--
(1) LIBOR is used as a benchmark rate in more than $200
trillion of contracts worldwide;
(2) a significant number of existing contracts that
reference LIBOR do not provide for the use of a clearly defined
or practicable replacement benchmark rate when LIBOR is
discontinued; and
(3) the cessation or non-representativeness of LIBOR could
result in disruptive litigation related to existing contracts
that do not provide for the use of a clearly defined or
practicable replacement benchmark rate.
(b) Purpose.--It is the purpose of this Act--
(1) to establish a clear and uniform process, on a
nationwide basis, for replacing LIBOR in existing contracts the
terms of which do not provide for the use of a clearly defined
or practicable replacement benchmark rate, without affecting
the ability of parties to use any appropriate benchmark rate in
new contracts;
(2) to preclude litigation related to existing contracts
the terms of which do not provide for the use of a clearly
defined or practicable replacement benchmark rate; and
(3) to allow existing contracts that reference LIBOR but
provide for the use of a clearly defined fallback and
practicable replacement rate, to operate according to their
terms.
(c) Rule of Construction.--Nothing in this Act shall be construed
to disfavor the use of any benchmark rate on a prospective basis.
SEC. 3. DEFINITIONS.
As used in this Act, the following terms shall have the following
meanings:
(1) ``Benchmark'' shall mean an index of interest rates or
dividend rates that is used, in whole or in part, as the basis
of or as a reference for calculating or determining any
valuation, payment or other measurement.
(2) ``Benchmark Administrator'' means a person that
publishes a Benchmark for use by third parties.
(3) ``Benchmark Replacement'' shall mean a Benchmark, or an
interest rate or dividend rate (which may or may not be based
in whole or in part on a prior setting of LIBOR), to replace
LIBOR or any interest rate or dividend rate based on LIBOR,
whether on a temporary, permanent, or indefinite basis, under
or in respect of a LIBOR Contract.
(4) ``Benchmark Replacement Conforming Changes'' shall mean
any technical, administrative, or operational changes,
alterations, or modifications that--
(A) the Board determines, in its discretion, would
address one or more issues affecting the
implementation, administration, and calculation of the
Board-Selected Benchmark Replacement in LIBOR
contracts; or
(B) solely with respect to a LIBOR Contract that is
not a Consumer Loan, in the reasonable judgment of a
Calculating Person, are otherwise necessary or
appropriate to permit the implementation,
administration, and calculation of the Board-Selected
Benchmark Replacement under or in respect of a LIBOR
Contract after giving due consideration to any
Benchmark Replacement Conforming Changes under
subparagraph (A).
(5) ``Board'' means the Board of Governors of the Federal
Reserve System.
(6)(A) ``Board-Selected Benchmark Replacement'' shall mean
a Benchmark Replacement identified by the Board that is based
on SOFR.
(B) The Board shall adjust the Board-Selected Benchmark
Replacement for each category of LIBOR Contract that the Board
may identify to--
(i) apply to each LIBOR tenor; and
(ii) incorporate the relevant Tenor Spread
Adjustment.
(C) For Consumer Loans, the Board-Selected Benchmark
Replacement shall initially reflect the spread between the
Board-Selected Benchmark Replacement and LIBOR immediately
before the LIBOR Replacement Date and shall incorporate the
relevant Tenor Spread Adjustment over a one-year transition
period.
(7) ``Calculating Person'' shall mean, with respect to any
LIBOR Contract, any person (which may be the Determining
Person) responsible for calculating or determining any
valuation, payment, or other measurement based on a Benchmark.
(8) ``Consumer Loan'' shall mean a consumer credit
transaction. For purposes of this paragraph, the terms
``consumer'' and ``credit'' have the meaning given those terms,
respectively, under section 103 of the Truth in Lending Act (15
U.S.C. 1602).
(9) ``Determining Person'' shall mean, with respect to any
LIBOR Contract, any person with the authority, right, or
obligation, including on a temporary basis, (as identified by
the provisions of the LIBOR Contract, or as identified by the
governing law of the LIBOR Contract, as appropriate) to
determine a Benchmark Replacement.
(10) ``Fallback Provisions'' shall mean terms in a LIBOR
Contract for determining a Benchmark Replacement, including any
terms relating to the date on which the Benchmark Replacement
becomes effective.
(11) ``LIBOR'' shall mean the overnight and 1-, 3-, 6-, and
12-month tenors of U.S. dollar LIBOR (formerly known as the
London interbank offered rate) as administered by ICE Benchmark
Administration Limited (or any predecessor or successor
thereof). LIBOR shall not include the 1-week or 2-month tenors
of U.S. dollar LIBOR.
(12) ``LIBOR Contract'' shall mean, without limitation, any
contract, agreement, indenture, organizational documents,
guarantee, mortgage, deed of trust, lease, Security (whether
representing debt or equity, and including any interest in a
corporation, a partnership, or a limited liability company),
instrument, or other obligation or asset that, by its terms,
continues in any way to use LIBOR as a Benchmark as of the
applicable LIBOR Replacement Date.
(13) ``LIBOR Replacement Date'' shall mean the first London
banking day after June 30, 2023, unless the Board determines
that any LIBOR tenor will cease to be published or cease to be
representative on a different date.
(14) ``Security'' shall have the meaning assigned to such
term in section 2(a) of the Securities Act of 1933 (15 U.S.C.
77b(a)).
(15) ``SOFR'' shall mean the Secured Overnight Financing
Rate published by the Federal Reserve Bank of New York (or a
successor administrator).
(16) ``Tenor Spread Adjustment'' shall mean--
(A) 0.00644 percent for overnight LIBOR;
(B) 0.11448 percent for 1-month LIBOR;
(C) 0.26161 percent for 3-month LIBOR;
(D) 0.42826 percent for 6-month LIBOR; and
(E) 0.71513 percent for 12-month LIBOR.
SEC. 4. LIBOR CONTRACTS.
(a) On the LIBOR Replacement Date, the Board-Selected Benchmark
Replacement shall, by operation of law, be the Benchmark Replacement
for any LIBOR Contract that, after giving any effect to subsection
(b)--
(1) contains no Fallback Provisions; or
(2) contains Fallback Provisions that identify neither--
(A) a specific Benchmark Replacement; nor
(B) a Determining Person.
(b) On the LIBOR Replacement Date, any references in the Fallback
Provisions of a LIBOR Contract to--
(1) a Benchmark Replacement that is based in any way on any
LIBOR value, except to account for the difference between LIBOR
and the Benchmark Replacement, or
(2) a requirement that a person (other than a Benchmark
Administrator) conduct a poll, survey, or inquiries for quotes
or information concerning interbank lending or deposit rates,
shall be disregarded as if not included in the Fallback Provisions of
such LIBOR Contract and shall be deemed null and void and without any
force or effect.
(c) Subject to subsection (g)(2), a Determining Person shall have
authority under this Act, but shall not be required, to select the
Board-Selected Benchmark Replacement as the Benchmark Replacement.
(d) Any selection by a Determining Person of the Board-Selected
Benchmark Replacement pursuant to subsection (c) shall be--
(1) irrevocable;
(2) made by the earlier of the LIBOR Replacement Date and
the latest date for selecting a Benchmark Replacement according
to the terms of such LIBOR Contract; and
(3) used in any determinations of the Benchmark under or in
respect of such LIBOR Contract occurring on and after the LIBOR
Replacement Date.
(e) If a Determining Person has authority to select the Board-
Selected Benchmark Replacement under subsection (c) but does not select
a Benchmark Replacement by the date specified in subsection (d)(2),
then, on the LIBOR Replacement Date, the Board-Selected Benchmark
Replacement shall, by operation of law, be the Benchmark Replacement
for the LIBOR Contract.
(f) If the Board-Selected Benchmark Replacement becomes the
Benchmark Replacement for a LIBOR Contract pursuant to subsection (a),
(c), or (e) then all Benchmark Replacement Conforming Changes shall
become an integral part of such LIBOR Contract by operation of law. For
the avoidance of doubt, a Calculating Person shall not be required to
obtain consent from any other person prior to the adoption of Benchmark
Replacement Conforming Changes.
(g) The provisions of this Act shall not alter or impair--
(1) any written agreement specifying that a LIBOR Contract
shall not be subject to this Act;
(2) any LIBOR Contract that contains Fallback Provisions
that identify a Benchmark Replacement that is not based in any
way on any LIBOR value (including, but not limited to, the
prime rate or the Effective Federal Funds Rate), except that
such LIBOR Contract shall be subject to subsection (b);
(3) any LIBOR Contract subject to subsection (c) as to
which a Determining Person does not elect to use a Board-
Selected Benchmark Replacement pursuant to subsection (c),
except to the extent that such LIBOR Contract is subject to
subsection (b) or (e);
(4) the application to a Board-Selected Benchmark
Replacement of any cap, floor, modifier, or spread adjustment
to which LIBOR had been subject pursuant to the terms of a
LIBOR Contract; or
(5) any provisions of Federal consumer financial law that
require creditors to notify borrowers regarding a change-in-
terms or that govern the reevaluation of rate increases on
credit card accounts under open-end (not home-secured) consumer
credit plans.
(h) Except as provided in section 5(c), the provisions of this Act
shall not alter or impair the rights or obligations of any person, or
the authorities of any agency, under Federal consumer financial law (as
defined in section 1002(14) of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (12 U.S.C. 5481(14)).
SEC. 5. CONTINUITY OF CONTRACT AND SAFE HARBOR.
(a) A Board-Selected Benchmark Replacement and the selection or use
of a Board-Selected Benchmark Replacement as a Benchmark Replacement
under or in respect of a LIBOR Contract, as well as any Benchmark
Replacement Conforming Changes, by operation of section 4 shall
constitute--
(1) a commercially reasonable replacement for and a
commercially substantial equivalent to LIBOR;
(2) a reasonable, comparable, or analogous rate, index, or
term for LIBOR;
(3) a replacement that is based on a methodology or
information that is similar or comparable to LIBOR;
(4) substantial performance by any person of any right or
obligation relating to or based on LIBOR; and
(5) a replacement that has historical fluctuations that are
substantially similar to those of LIBOR for purposes of the
Truth in Lending Act and its implementing regulations.
(b) Neither of (1) the selection or use of a Board-Selected
Benchmark Replacement as a Benchmark Replacement or (2) the
determination, implementation, or performance of Benchmark Replacement
Conforming Changes, in each case by operation of section 4, shall (A)
be deemed to impair or affect the right of any person to receive a
payment, or to affect the amount or timing of such payment, under any
LIBOR Contract or (B) have the effect of (i) discharging or excusing
performance under any LIBOR Contract for any reason, claim, or defense
(including, but not limited to, any force majeure or other provision in
any LIBOR Contract), (ii) giving any person the right to unilaterally
terminate or suspend performance under any LIBOR Contract, (iii)
constituting a breach of any LIBOR Contract, or (iv) voiding or
nullifying any LIBOR Contract.
(c) No person shall be subject to any claim or cause of action in
law or equity or request for equitable relief, or have liability for
damages, arising out of--
(1) the selection or use of a Board-Selected Benchmark
Replacement,
(2) the implementation of Benchmark Replacement Conforming
Changes, or
(3) with respect to a LIBOR Contract that is not a Consumer
Loan, the determination of Benchmark Replacement Conforming
Changes,
in each case after giving effect to the provisions of section 4;
provided, however, that in each case any person (including a
Calculating Person) shall remain subject to the terms of a LIBOR
Contract that are not affected by this Act and any existing legal,
regulatory, or contractual obligations to correct servicing or other
ministerial errors under or in respect of a LIBOR Contract.
(d) The selection or use of a Board-Selected Benchmark Replacement
or the determination, implementation, or performance of Benchmark
Replacement Conforming Changes, in each case by operation of section 4,
shall not be deemed to--
(1) be an amendment or modification of any LIBOR Contract
for the purpose of the governing law of such LIBOR Contract; or
(2) prejudice, impair, or affect any person's rights,
interests, or obligations under or in respect of any LIBOR
Contract.
(e) Except as provided in either subsections (a), (b), or (c) of
section 4, the provisions of this Act shall not be interpreted as
creating any negative inference or negative presumption regarding the
validity or enforceability of--
(1) any Benchmark Replacement (including any method for
calculating, determining, or implementing an adjustment to the
Benchmark Replacement to account for any historical differences
between LIBOR and the Benchmark Replacement) that is not a
Board-Selected Benchmark Replacement; or
(2) any changes, alterations, or modifications to or in
respect of a LIBOR Contract that are not Benchmark Replacement
Conforming Changes.
SEC. 6. PREEMPTION.
(a) This Act and the regulations hereunder shall supersede any and
all laws, statutes, rules, regulations, or standards of any State, the
District of Columbia, or any territory or possession of the United
States, insofar as they provide for the selection or use of a Benchmark
Replacement or related conforming changes.
(b) No provision of State or local law that expressly limits the
manner of calculating interest, including the compounding of interest,
shall apply to the selection or use of a Board-Selected Benchmark
Replacement or Benchmark Replacement Conforming Changes.
SEC. 7. TRUST INDENTURE ACT OF 1939.
Section 316 of the Trust Indenture Act of 1939 (15 U.S.C. 77ppp) is
amended--
(1) by striking ``and'' after ``of subsection (a),'' in
subsection (b); and
(2) by inserting ``, and except that the right of any
holder of any indenture security to receive payment of the
principal of and interest on such indenture security shall not
be deemed to be impaired or affected by any change occurring by
the application of section 4 of the Adjustable Interest Rate
(LIBOR) Act of 2021 to any indenture security'' after ``subject
to such lien'' in subsection (b).
SEC. 8. RULEMAKING.
Not later than 180 days after the date of enactment of this Act,
the Board shall issue such regulations as may be necessary or
appropriate to enable it to administer and carry out the purposes of
this Act.
SEC. 9. REVISED CALCULATION RULE TO ADDRESS INSTANCES WHERE 1-MONTH USD
LIBOR CEASES OR IS NON-REPRESENTATIVE.
Section 438(b)(2)(I) of the Higher Education Act of 1965 (20 U.S.C.
1087-1(b)(2)(I)) is amended by adding at the end the following:
``(viii) Revised calculation rule to
address instances where 1-month usd libor
ceases or is non-representative.--
``(I) Substitute reference index.--
The provisions of this clause apply to
loans for which the special allowance
payment would otherwise be calculated
pursuant to clause (vii).
``(II) Calculation based on sofr.--
For loans described in subclause (III)
or (IV), the special allowance payment
described in this subclause shall be
substituted for the payment provided
under clause (vii). For each calendar
quarter, the formula for computing the
special allowance that would otherwise
apply under clause (vii) shall be
revised by substituting `of the quotes
of the 30-day Average Secured Overnight
Financing Rate (SOFR) in effect for
each of the days in such quarter as
published by the Federal Reserve Bank
of New York (or a successor
administrator), adjusted daily by
adding the Tenor Spread Adjustment, as
that term is defined in the Adjustable
Interest Rate (LIBOR) Act of 2021, for
1-month LIBOR contracts of 0.11448
percent' for `of the 1-month London
Inter Bank Offered Rate (LIBOR) for
United States dollars in effect for
each of the days in such quarter as
compiled and released by the British
Bankers Association'. The special
allowance calculation for loans subject
to clause (vii) shall otherwise remain
in effect.
``(III) Loans eligible for sofr-
based calculation.--Except as provided
in subclause (IV), the special
allowance payment calculated under
subclause (II) shall apply to all loans
for which the holder (or, if the holder
acts as an eligible lender trustee for
the beneficial owner of the loan, the
beneficial owner of the loan) at any
time after the effective date of this
clause notifies the Secretary that the
holder or beneficial owner
affirmatively and permanently elects to
waive all contractual, statutory, or
other legal rights to a special
allowance paid under clause (vii) or to
the special allowance paid pursuant to
any other formula that was previously
in effect with respect to such loan,
and accepts the rate described in
subclause (II). Any such waiver shall
apply to all loans then held, or to be
held from time to time, by such holder
or beneficial owner; provided that, due
to the need to obtain the approval of
one of the following, demonstrated to
the satisfaction of the Secretary--
``(aa) one or more third
parties with a legal or
beneficial interest in loans
eligible for the SOFR-based
calculation, or
``(bb) a nationally
recognized rating organization
assigning a rating to a
financing secured by loans
otherwise eligible for the
SOFR-based calculation,
the holder of the loan (or, if the
holder acts as an eligible lender
trustee for the beneficial owner of the
loan, the beneficial owner of the loan)
may elect to apply the rate described
in subclause (II) to specified loan
portfolios established for financing
purposes by separate notices with
different effective dates. The special
allowance rate based on SOFR shall be
effective with respect to a portfolio
as of the first day of the calendar
quarter following the applicable
effective date of the waiver received
by the Secretary from the holder or
beneficial owner and shall permanently
and irrevocably continue for all
subsequent quarters.
``(IV) Fallback provisions.--
``(aa) In the event that a
holder or beneficial owner has
not elected to waive its rights
to a special allowance payment
under clause (vii) with respect
to a portfolio with an
effective date of the waiver
prior to the first of--
``(AA) the date on
which the ICE Benchmark
Administration (`IBA')
has permanently or
indefinitely stopped
providing the 1-month
United States Dollar
LIBOR (`1-month USD
LIBOR') to the general
public,
``(BB) the
effective date of an
official public
statement by the IBA or
its regulator that the
1-month USD LIBOR is no
longer reliable or no
longer representative,
or
``(CC) the LIBOR
Replacement Date, as
that term is defined in
section 3 of the
Adjustable Interest
Rate (LIBOR) Act of
2021,
the special allowance rate
calculation as described in
subclause (II) shall, by
operation of law, apply to all
loans in such portfolio.
``(bb) In such event--
``(AA) the last
determined rate of
special allowance based
on 1-month USD LIBOR
will continue to apply
until the end of the
then current calendar
quarter; and
``(BB) the special
allowance rate
calculation as
described in subclause
(II) shall become
effective as of the
first day of the
following calendar
quarter and remain in
effect for all
subsequent calendar
quarters.''.
Passed the House of Representatives December 8, 2021.
Attest:
CHERYL L. JOHNSON,
Clerk.