Consumer Credit Act reforms announced

The Treasury has published a policy statement on its plans for the long-awaited reforms of the fifty-year old Consumer Credit Act (CAA) which it says will create a framework that places greater emphasis on FCA rules and guidance rather than prescriptive requirements, designed to ensure the provision of clearer information to consumers while giving firms the flexibility to innovate.

The policy statement comes in response to the government’s Phase 1 consultation on CCA reform held a year ago, which set out its approach and detailed proposals in relation to information requirements, sanctions and criminal offences.

There were responses from 65 stakeholders, including from consumer groups, debt charities, trade bodies, firms and professionals, and the policy statement now sets out the approach for the remaining CCA provisions and the changes the government will take forward including rights and protections, scope and key definitions, any consequential changes and transitional provisions.

FCA guidance

The government is proposing to repeal many of the remaining CCA provisions and much of the associated secondary legislation, as well as updating the legislation to reflect changes in technology. Some of these provisions may fall away where they are no longer needed and others will be recast where appropriate into FCA rules subject to any FCA consultations. 

However, the government does not expect that CCA provisions which are repealed and recast into FCA rules to be replicated exactly. Instead, the FCA will consider what appropriate requirements should be put in place, considering its statutory objectives, powers under FSMA and its existing rules including principles like the Consumer Duty.

Changes following consultation

The majority of information disclosure requirements in the CCA and accompanying regulations will be repealed and recast into FCA rules.

The government also considers sanctions are disproportionate and not needed, with the existing FCA regime and court process providing robust consumer protection. 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a court order, unenforceability until the breach is remediated, and disentitlement to interest and default sums will be repealed and fall away when the relevant information requirements these attach to are also repealed.  

However, the criminal offences which apply in relation to canvassing off trade premises, circulars to minors, credit reference agencies, pawnbroking and the debtor or hirer providing information about goods, will be retained, with the government arguing they serve as a strong deterrent against harmful business practices.  

The Treasury statement noted: “Overall, these CCA reform changes will support a modernised and flexible consumer credit regime with more outcomes-based principles and less prescription in FCA rules, while ensuring consumers have robust protections.”

Further changes

There will no longer be a Phase 2 consultation on the remaining provisions of the CCA not covered in Phase 1. Instead, the government is proposing that the following provisions should be repealed and either fall away or be recast into FCA rules:

• Withdrawal rights (noting some parts will be retained)
• Cancellation rights (noting some parts will be retained)
• Early settlement and rebate rights
• Termination of agreements (including voluntary termination) (noting some parts will be retained
• Securities and sureties (noting some parts will be retained)
• Credit-token agreements, acceptance and liability for misuse of credit tokens
• Agreement to enter future agreement void
• Liability for misuse of credit facilities
• Interest not to be increased on default
• Statements by creditor or owner to be binding

Legislation to be retained

The government is proposing that the following provisions should be retained in legislation:

• Consumer credit agreements, meaning of credit, running account credit, fixed sum credit, restricted used and unrestricted use credit, debtor-creditor-supplier agreements, and debtor-credit agreements
• Consumer hire agreements
• Linked transactions
• Cancellation: recovery of money paid by debtor or hirer, return of goods and goods given in part exchange
• Withdrawal from prospective agreement
• Death of debtor or hirer
• Protected goods, recovery of possession of goods or land, summary diligence not competent in Scotland
• Ineffective securities
• Pawnbroking
• Negotiable instruments
• Land mortgages
• Majority of the remaining provisions under Judicial Control (including Time Orders, interest, etc.), Ancillary Credit Businesses (including credit reference agencies), Enforcement of Act and Supplemental (including interpretation, definitions, etc.)

Next steps

The reforms form part of the Financial Services and Markets Bill introduced in the King’s Speech. 

“People need to be able to make informed choices when applying for and using credit. The Consumer Credit Act was written for a different era – we are creating a flexible regime fit for the digital age.”

The FCA has issued a statement saying: “We intend to consult on the key elements of the consumer credit framework previously set out in legislation, where we have the powers to do so, considering the whole consumer credit process.

“Our approach will be underpinned by the Consumer Duty – which sets our expectations for firms to deliver good outcomes for consumers.

“As part of our policy development, we will consider existing consumer rights and protections, including for example, cancellation and withdrawal, and termination of agreements, including early settlement. Any proposals would be supported by evidence, including a cost benefit analysis and stakeholder feedback.”

Alongside reform of the CCA, the government intends to review the regulatory regime for credit broking to ensure it remains proportionate, supports financial inclusion and provides robust consumer protection.

Reaction

“These changes will be an important first step towards a better, more modern and clearer regulatory regime, benefitting consumers and firms to create a healthier credit market. 

“Individuals and businesses captured by the consumer credit regime have not been well served by the CCA for a number of years. This is a real opportunity to reshape regulation and enable growth. FLA members are pivotal in driving that growth and acting as an engine for economic activity.” 

“Modernisation of the Consumer Credit Act to support better outcomes for both consumers and firms was a key recommendation of The Woolard Review of the unsecured credit market. These first steps, to enable clearer information and new products, are therefore welcome ones.”

“UK Finance welcomes the government’s plans to modernise the Consumer Credit Act. Ambitious, forward-looking changes are needed to give consumers clearer, more accessible information, and lenders flexibility to provide new and innovative products. These reforms are an important step towards a simpler, future‑proofed regime with strong consumer protections in an increasingly digital world.”

Finance Connect UK Summer Conference

The implications of Consumer Credit Act reform for lenders, brokers and specialist finance providers will also be explored in detail at the Finance Connect UK Summer Conference 2026 on Thursday 4 June at Kings Place, London.

The session, entitled “Everything you need to know about the reform of the Consumer Credit Act”, will feature Amanda Hulme, partner at TLT, alongside Andrew Brameld, former chief commercial officer at BNP Paribas Personal Finance UK, examining how the proposed changes could reshape regulation, customer outcomes and operational requirements across the specialist lending market.

Find out more at https://finance-connect.com/everything-you-need-to-know-about-the-reform-of-the-consumer-credit-act/