Reform of the Consumer Credit Act

On 19th May 2025 the government released a long-awaited consultation on reforming the Consumer Credit Act 1974 and associated legislation. The consultation is open until 21 July 2025.

What does the Consultation on Consumer Credit Act 1974 (CCA) Reform Propose?

The consultation is split into two phases, due to the size and complexity of the task. This consultation is the first phase which “seeks views on the proposals in relation to information requirements, sanctions and criminal offences”. Phase 2 will set out how the Government intends to reform the scope of regulation and rights and protections under the CCA. Both must be carried out prior to implementation of any change.

At a glance the consultation confirms the government aims to:

1. Repeal most of the legislation and associated secondary legislation, replacing them with a responsibility for the FCA to include relevant provisions in the FCA Handbook. Essentially, the government is accepting the argument that industry has made to them for several years that the current legislation is not fit for purpose, requiring certain documents (such as NOSIAs) to be sent to customers containing phrases which run contrary to other requirements, such as the consumer duty. By providing the FCA with the ability to set these rules it will be possible for them to harmonize the requirements.

2. Not all legislative requirements will be repealed. Section 1.9 of the consultation reads “The Government expects some provisions, which are not capable of being recreated in FCA rules (such provisions may create third party rights and obligations) but are nevertheless important, to be retained in legislation to ensure robust consumer protection.”

3. Consider the transition to new rules, including how to deal with non-compliance with the current regulations during any implementation phase. The consultation explores methods that can be used to avoid lessening consumer protection.

4. Section 4 focuses on the information requirement obligations currently imposed on firms, the consultation recognises that they do not always produce good customer outcomes as some information is complex and confusing. There is an acceptance that it is not always best to provide more information to customers, sometimes there can be too much. This provides a clear rationale to move the provisions into the FCA’s remit.

5. 4.7 says: "The Government considers that information requirements guided by FCA principles and rules would be a more effective, flexible and proportionate way to regulate the sector, ensuring the focus is on achieving good consumer outcomes and in turn maximising consumer understanding of their credit product key features and how these operate." Government believes it would bring alignment with the Consumer Duty, would bring flexibility (to respond to evolving consumer journeys, credit products and markets), and it would allow for future developments in digital technology.

6. However, moving all of the information provisions into FCA rules will not be a ‘copy and paste’ job - it will involve a lot of work and engagement from the FCA to ascertain the best approach - however that process will be an opportunity to handle gone-away situations, as well as other challenges.

7. Small agreements (such as BNPL) will be brought into scope, although the detail of the requirements will need to be set at a later date.

8. Finally, section 5 considers the sanctions for non-compliance. This section demonstrates a clear intention to a more balanced approach to sanctions. Currently some sanctions, such as disapplying interest or declaring an agreement unenforceable, are disproportionate to the non-compliance.

The consultation is open until 21 July, and following that, it will be a case of ‘watch this space’ for the next steps.