Consumer Credit Act (CCA) Reform – Phase 1 Consultation (May 2025):

HM Treasury has released a consultation paper on reforming the Consumer Credit Act (CCA) provisions, with a long-term policy objective of transferring away from the CCA to FCA regulation.

Since the implementation of FCA regulation for the consumer credit market in 2014, the Consumer Credit Act 1974 has increasingly been seen as outdated and overly complex. The Government aims to modernise the regime to reflect technological advances, consumer behaviour, and market innovation. The reform seeks to better align consumer credit regulation with the FCA’s principles-based approach—especially under the Consumer Duty—and to address provisions that are obsolete, potentially contradictory, or have fallen into disuse and are better handled by FCA rules.

The Government’s vision for a reformed regime involves moving from the prescriptive legislation of the CCA to principles-based FCA rules underpinned by the Consumer Duty. The new regime will retain only essential legislative provisions that cannot be replicated in FCA rules. The focus will shift to outcomes-based regulation to improve consumer understanding and engagement.

This consultation is the first of two the Government intends to conduct on these reforms. It has not set out a timetable for implementation, as the changes would require amendments to primary legislation. It is therefore likely that the reforms will not be implemented until the end of the decade.

Phase 1 Focus Areas

1. Information Requirements

Current Issues:

• The CCA mandates highly prescriptive, technical disclosures (e.g. pre-contract credit information, arrears notices).
• These are often confusing, duplicative, and not consumer-friendly, especially in digital formats.
• Firms are restricted in how they communicate with consumers, limiting innovation and personalisation.

Proposed Reform:

• Repeal all CCA information disclosure provisions (e.g. Sections 55–65, 77–89, 97–98A).
• Recast them into FCA rules, guided by the Consumer Duty and outcomes-based regulation.
• Allow the FCA to:
  • Tailor rules to different consumer needs.
  • Enable digital-first, mobile-friendly disclosures.
  • Conduct consumer testing and research to improve understanding.

Key Benefits:

• Greater flexibility for firms to innovate.
• Better consumer engagement and understanding.
• Alignment with modern communication channels and digital journeys.

2. Sanctions

Current Issues:

• The CCA imposes automatic sanctions for non-compliance with information requirements, including unenforceability of agreements and disentitlement to interest or default charges.
• These sanctions are punitive, complex, and often disproportionate to the harm caused.
• They can lead to confusing outcomes for consumers and legal uncertainty for firms.

Proposed Reform:

• Remove automatic sanctions from legislation.
• Rely on:
  • FCA enforcement powers (e.g. fines, redress).
  • Consumer Duty obligations.
  • Financial Ombudsman Service (FOS) for individual redress.
  • Court processes for fair adjudication.

Key Benefits:

• Encourages proportionality and fairness.
• Reduces legal complexity and operational burden.
• Aligns with the modern regulatory model under FSMA and the FCA.

3. Criminal Offences

Current Issues:

• The CCA includes several rarely used criminal offences, such as:
  • Canvassing off trade premises (e.g. door-to-door credit sales).
  • Sending credit offers to minors.
  • Failures by credit reference agencies.
• These offences are outdated and infrequently prosecuted.

Proposed Reform Options:

• (a) Repeal all criminal offences and rely on FCA enforcement.
• (b) Retain all offences for deterrence.
• (c) Retain only key offences (e.g. those protecting minors or against door-to-door selling).

Key Considerations:

• The FCA already has strong enforcement powers.
• FSMA makes it a criminal offence to conduct regulated activity without authorisation.
• Repeal would modernise the regime and reduce duplication.

Phase 2 Preview

This phase will address more significant issues and may have more substantive long-term effects on the market. The Government has indicated that it is not yet ready to bring forward a formal consultation on these matters and continues to engage with stakeholders from industry and consumer groups.

Phase 2 will focus on the core structural and consumer protection elements of the CCA that are not addressed in Phase 1. These include:

1. Rights and Protections

• Review key consumer rights such as:
  • Section 75: Joint liability of credit providers for misrepresentation or breach of contract by suppliers.
  • Section 140A: Unfair relationship provisions allowing courts to intervene.
• Objective: Determine which rights can be replicated under FCA rules and which must remain in legislation to ensure robust consumer protection.

2. Scope and Key Definitions

• Clarify and modernise definitions of:
  • Types of credit agreements (e.g. fixed-sum, running account).
  • Consumer hire.
  • Business lending to sole traders and small partnerships.
• Objective: Ensure the regulatory perimeter is clear, future-proof, and aligned with market developments.

3. Consequential Legislative Changes

• Review and amend related legislation such as:
  • The Regulated Activities Order (RAO).
  • Payment Services Regulations 2017.
  • Financial Services (Distance Marketing) Regulations 2004.
• Objective: Ensure consistency across the broader financial regulatory framework.

Cross-Cutting Themes in Phase 2

The Government will also explore how the reformed regime can support broader policy goals:

• Green Finance: Ensure regulation supports sustainable credit products.
• Islamic Finance: Remove barriers to Sharia-compliant products.
• Technology: Enable digital-first, flexible consumer journeys.
• Equality & Inclusion: Ensure reforms support vulnerable consumers and those with protected characteristics.

This consultation is now open, and the deadline for feedback is 21st July 2025.

Although still at an early stage, these changes are likely to have a significant long-term impact on the consumer credit sector. Firms should pay close attention to how these changes may affect them and how to manage the transition effectively. The Phase 2 consultation, particularly around consumer hire and business lending, may have significant implications for firms in those sectors. There may be changes in the definitions of what constitutes business lending, and protections currently applicable to hire purchase customers may be extended to hire agreements.

Huntswood’s expert advisory team is happy to discuss any aspect of these plans and how they may affect your business.