Regulatory Update: June-July

Every month we bring you the latest regulatory updates, here are the most recent!

Reform of the Consumer Credit Act 1974 (CCA)

In May 2025 HM Treasury published their phase 1 consultation on removing provisions from the CCA, enabling the FCA to create equivalent and more flexible rules in the Handbook, most likely CONC.

The three main areas of review were:

1. Repealing and recasting provisions related to information requirements, statutory sanctions, and criminal offenses and giving the FCA the power to form and manage those rules under an FSMA style regime. A major theme (and I remember sitting in conferences where people complained about the prescriptive nature of the CCA and how it sometimes actively fought against consumer understanding) is repealing the pre-contract disclosure, content of agreements as well as the requirement to send statements and notices of sums in arrears and replace them with FCA rules.

2. Removal of sanctions for non-compliance which currently include a lack of enforceability during a period of non-compliance and inability to charge interest during those times was also included.

3. The consultation set out three possible options for reforming CCA-specific criminal offences (e.g. door-to-door canvassing and circulars to minors):  

   (a) repeal all such offences,  

   (b) retain them all, or  

   (c) retain only those relating to minors and canvassing.  

The Treasury has now released their proposed reforms and the relevant legislation is currently working its way through Parliament. The proposal is to remove most provisions in the CCA and recast them in the FCA Handbook as the FCA see fit, but The Government is proposing to retain certain CCA provisions where the provisions are complex and removing them would require more work.

The provisions that will be removed are:

• Information notices with the form, content and sanctions for non-compliance (currently unenforcaebility of the debt and inability to apply interest during the period of non-compliance) passing to the FCA to decide on the appropriate equivalent

• Sanctions: The sanctions of unenforceability without a court order, unenforceability until the breach is remediated, and disentitlement to interest and default sums will be repealed and fall away when the relevant information requirements these attach to are also repealed.

• Rights and protections: Many of the CCA provisions which cover rights and protections will be repealed. The Government considers the current requirements in the CCA are complex and in need of modernisation and that robust protection could be achieved through FCA rules as the FCA is responsible for setting conduct requirements. 

What is interesting is that the FCA has not yet started to consult on what their rules will look like, so Parliament is being asked to vote when they don't know what the replacement will be and therefore what consumer protection will look like.

From a practical point of view for lenders, debt advisors and other regulated firms, the message is to look out for the FCA's consultation.

Consumer Duty: scope and proportionality consultation

The FCA is consulting on changes to rules and non-Handbook guidance to:

• Remove business with non-UK customers from the Duty’s scope.

• Make it clearer where the Duty applies and where it doesn’t.

• Clarify when and how firms can rely on each other when they work together in distribution chains, and how they can apply the Duty more proportionately.

• Explain the interaction between the Duty and other product governance rules.

The changes are intended to clarify when the Duty applies to give firms more confidence in its application.

Chapter 6 of the Consultation Paper sets out a number of technical clarifications which are intended to correct or clarify the rules around the application of the Duty, outdated references and minor revisions.

Feeback should be submitted by 18 September 2026.

Simplifying the insurance rules

This Consultation Paper follows final rules published in December 2025 and is published alongside the consultation on the application of the Consumer Duty to business with non-UK customers.

The FCA intends to:

• Narrow the scope of FCA rules for non-UK businesses. Detailed insurance conduct requirements would apply where there is a clear UK connection based on the customer’s habitual residence and, where relevant, the location of the risk.

• Removing unnecessary disclosure requirements, such as duplicative and low-value disclosure requirements across ICOBS.

• Increasing flexibility in means of disclosure. Firms would have greater flexibility in choosing how to provide disclosures to customers, including through digital channels. Firms must continue to provide information on paper at the customer’s request.

• Simplifying the rules that apply when insurance is sold with advice by removing references to ‘advice’ that do not involve a personal recommendation. This leaves a clearer distinction between sales involving a personal recommendation and those that do not.

• Amending rules for professional indemnity insurance (PII), including the currency denomination of minimum PII levels for insurance intermediaries from euros to Pounds Sterling at an appropriate conversion rate, without reviewing or changing the underlying minimum levels.

Comments should be submitted by 4 September 2026.

Shaping the future of the credit market

A June speech by Alison Walters, FCA director of consumer finance hints at the future direction of UK consumer credit regulation and the priorities of the FCA. The underlying message is that the consumer credit market must undergo significant change through cooperation between regulators, firms and government.

Today’s consumer credit market is described as fragmented, overly complex, inconsistent in consumer protections and struggling to keep pace with technology.

A recurring theme is that firms should no longer focus on simply complying with regulations. Instead, under the Consumer Duty, firms are expected to demonstrate that customers actually experience good outcomes. Walters repeatedly stresses that firms should:

• Use data effectively

• Identify vulnerable customers

• Intervene early when people face financial difficulties

• Actively improve customer outcomes rather than merely avoid breaking rules.

Innovation is encouraged, but only if it benefits consumers. Ideally, it would help to increase financial inclusion, improve affordability and avoid creating new risks. Innovation should be responsible.

Artificial Intelligence will, it is suggested, rapidly transform lending decisions. The FCA does not intend to create entirely new AI regulations as the Consumer Duty will still apply. Firms will be expected to govern AI carefully and explain its use.

Changes to DEPP

This Consultation aims to improve transparency and consistency through a small number of targeted updates:

• The minimum penalty for individuals guilty of the most serious market abuse cases will raise from £100,000 to £150,000.

• It will be made clear that the FCA may increase penalties to deter wealthier individuals.

• There will be clarifications to how the FCA will treat deferred bonuses, pay and shares, in line with recent Tribunal decisions.

• Income and capital thresholds will be raised to reflect living costs.

• There will be more flexibility in who makes settlement decisions in some cases.

• The penalty framework will be extended to cover cryptoasset market abuse and reflect new powers under the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026.

Comments should be sent to the FCA by 10 August 2026.

Insurance financial crime controls – multi-firm review

This review focused on the design of financial crime systems and controls with the central question being how well firms are mitigating the risks of being used to further financial crime.

The FCA found that controls are mostly effective but that there are areas for improvement and firms should follow good practice on risk assessments, client due diligence arrangements and transaction monitoring. The findings will be of interest to insurers and insurance intermediaries, and other firms as they review their financial crime controls.

Cross sector findings include:

• AML transaction monitoring: best practice is for firms to consider the risks and benefits of their approach to transaction monitoring and to document their rationale. All firms remain subject to the obligations relating to suspicious activity reporting, sanctions compliance, and wider financial crime management. Any reduction or simplification in controls should therefore be risk-based, proportionate, and clearly evidenced.

• Controls monitoring and testing: while second- and third-line testing activity was consistent, some firms only had limited evidence that they had structured, risk-based monitoring and testing plans.

• Policies and procedures: while firms had comprehensive group-level policies and procedures, they were often not specific enough at business unit or jurisdictional level.

• Roles and responsibilities: most firms have a three-lines of defence model, though many did not have a formal RACI matrix to clarify responsibilities across the framework.

• Obligations management: most firms did not maintain an obligations register. Best practice is to clearly articulate the firm’s obligations and map them to specific controls, processes and roles.

• Third-party outsourcing: where firms have outsourced financial crime activities, oversight should be proportionate to the risks and materiality of the outsourced activities. The FCA expect firms to produce and review risk-focused management information to monitor third-party performance, identify emerging risks and support timely escalation.

Firms that track regulatory developments carefully are better positioned to protect their business and maintain compliance. A bespoke regulatory update, curated by our in-house experts gives your firm’s Senior Management a clear view of what’s changing and what’s coming next. Instead of reacting to reforms once they’re finalised, our detailed document enables financial services firms to gain an early understanding of the themes, proposals and supervisory priorities most relevant to their activities.

Contact Robert Bell to find out more.