ARRC Sets Out "Guiding Principles" For Consumer Product Fallback Language

The Alternative Reference Rates Committee ("ARRC") Consumer Products Working Group (the "Working Group") outlined "guiding principles" on contractual fallback language for consumer loan products.

According to the Working Group, when dealing with consumer loan products, it is crucial to:

• engage with stakeholders, including lenders, servicers, investors, regulators and consumer groups, and comply with any relevant consumer protection laws and regulations during LIBOR transition planning;
• ensure that stakeholders understand the details of fallback recommendations prior to the transition;
• minimize the expected value transfer in connection with proposed fallbacks for LIBOR;
• limit flexibility and discretion allotted in fallback recommendations to, among other things, reduce potential disputes; and