Reforming The Consumer Credit Act 1974: Modernisation, Flexibility And The Road Ahead

After many false starts over the years, HM Treasury has published a Policy Statement setting out plans for comprehensive reforms to the retained provisions of the Consumer Credit Act 1974 (CCA), which, once implemented, will mark the most significant overhaul of consumer credit regulation in decades.

What's changing?

Following a consultation launched in May 2025, and consideration of the views expressed by the 65 respondents representing both lenders and consumer CCA which will be implemented through the upcoming Financial Services and Markets Bill:

1. Information requirements will be modernised

Most of the information disclosure requirements currently set out in the CCA will be repealed and recast as Financial Conduct Authority (FCA) rules. It is hoped that this will mark a move away from rigid, prescriptive documentation towards clearer communications that firms can tailor to individual consumer needs and allow them to be updated and adapted more easily in future as the credit landscape continues to be reshaped by technological change and innovation.

2. Automatic sanctions will be repealed

Having acknowledged concerns from lender groups that the existing sanctions of unenforceability and disentitlement to interest lacked proportionality and often failed to reflect the extent of any harm caused to a consumer, the government now intends to repeal these sanctions entirely.

In its response, the FCA expressed the view that in the present day its own handbook rules and guidance working alongside the Financial Ombudsman Service and Consumer Duty are sufficient to ensure adequate compensation for losses suffered by consumers.

3. Criminal offences will be retained

Although there were calls from lenders for their removal, the criminal offences relating to practices such as canvassing off trade premises and sending circulars to minors will remain in place. The government recognised that these serve as important deterrents against particularly harmful business practices, and accepted the view expressed by consumer groups that a lack of prosecutions was indicative of their success.

Complex provisions—including Section 75 connected lender liability and Sections 140A-C unfair relationships provisions—will not be changed at this stage and remain subject to further policy work.

What happens next?

The proposed changes will be brought forward as part of the Financial Services and Markets Bill announced in the King's Speech. The government intends to work closely with the FCA to ensure a smooth transition, with careful consideration given to how existing agreements will be treated.

Practical impact of proposed CCA reforms

Although the changes that the government has committed to are welcome, it is not yet clear whether firms will be given the required latitude to tailor their disclosure and communications to consumers in a manner that is genuinely appropriate to the specific products and services being offered, rather than being constrained by a one-size-fits-all approach.

That said, the decision to transfer the various prescriptive information requirements from primary legislation into FCA Handbook rules is a positive step. Placing these requirements within the Handbook, rather than embedding them in statute, should allow for more rapid amendment and adaptation as consumer needs, behaviours and expectations evolve over time. It also opens the door to a more iterative and evidence-based approach to regulation, where the FCA can respond to market developments and consumer research without the need for lengthy parliamentary processes.

There is, however, a trade-off to consider. By moving these requirements out of primary legislation, the clarity and certainty that case law has developed over time in interpreting statutory provisions may gradually be diminished. Court decisions interpreting the existing legislative framework have, over the years, provided firms with a valuable body of precedent on which to rely when assessing their CCA obligations. As these provisions are replaced by Handbook rules, that body of case law will become less directly applicable, and firms may face a period of uncertainty as the new regulatory landscape takes shape.

It is therefore essential that the FCA takes a proportionate and transparent approach to enforcement. Firms will need clear guidance on the FCA's expectations, and the regulator should be willing to engage constructively with industry as new standards bed in. An enforcement approach that is measured and clearly communicated will be critical to ensuring that firms have the confidence to innovate in their disclosure practices, rather than defaulting to overly cautious or formulaic compliance strategies for fear of regulatory action.

The success of these reforms will ultimately depend on the detail of the rules themselves. If the FCA adopts an overly rigid or prescriptive approach when drafting its new Handbook provisions, firms may find themselves in much the same position as before — constrained in their ability to innovate and to present information to consumers in a way that is clear, relevant and tailored to the product in question.

The hope is that the FCA will embrace the spirit of the Consumer Duty and use this opportunity to create a disclosure framework that prioritises meaningful consumer understanding over mere technical compliance.

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