Reform of the Consumer Credit Act 1974 (CCA): A turning point in the consumer credit regime

Introduction

Reform of the Consumer Credit Act 1974 (CCA) has been several years in the making. A series of FCA-commissioned reviews, and a 2022 consultation by HM Treasury (HMT) examining the strategic approach to reform, has culminated in HMT defining a new two-phased approach for delivery of reform in its latest consultation, published on 19 May 2025.

The proposed reforms seek to address multiple challenges that have arisen since the original enactment of the CCA, most notably the advent of digital credit businesses and evolving products, such as buy now pay later (BNPL), with which the legislation and associated regulatory framework has struggled to keep pace.

Given the scale and complexity of the CCA, and the scope of the proposed reforms, the two-phased approach is intended to facilitate the work needed to implement the reforms and minimise disruption. The consultation for Phase 1 seeks views on the government's proposed approach to information requirements, and sanctions and criminal offences. A further consultation, as part of Phase 2, will be focused on exploring rights and protections, as well as key definitions and the scope of consumer credit regulation. Responses to the Phase 1 consultation are requested by 21 July 2025.

While very much still in development, the clear message which comes from this proposal is one of aligning consumer credit regulation with the broader financial services regulatory framework, recognising where appropriate protections are provided by other regimes, and creating greater forward-looking flexibility by devolving greater responsibility for setting the rules to the FCA. The proposed greater role for the FCA in setting the scope of consumer credit protection opens new challenges and opportunities for both the industry and the regulator, with a need for firms to pay closer attention to a regime which may be more adaptable and changing than in the fifty years since the CCA was first introduced.

Background and the government's vision for the future of the unsecured credit market

When originally enacted, the CCA was considered a 'radical reform' and a solution to the disparate regulatory framework of the pre-1974 unsecured consumer credit market.

Attempts to adapt the CCA to the modern consumer credit market over the following decades included the Consumer Credit Act 2006, which introduced a licensing regime and brought activities within the scope of the Financial Ombudsman Service (FOS). Subsequent reforms in 2014 brought consumer credit regulation within the remit of the Financial Services and Markets Act 2000 (FSMA 2000), which involved repealing 82 sections of the CCA. These efforts resulted in a somewhat patchy framework; today, the regime is contained partly in FCA rules and partly in the CCA (and associated secondary legislation).

As such, the government recognised the need for further regulatory reform. In 2019, the FCA's Review of Retained Provisions in the CCA concluded that provisions relating to rights and protections could not be repealed without adversely affecting the appropriate degree of consumer protection, and the 2021 Woolard Review highlighted the need for a more 'outcomes-based' regime and, in particular, the need for the regulation of BNPL products.

In June 2022, the government announced its intention to modernise the legislation with a view to moving and recasting many of its provisions (including much of the secondary legislation) as FCA rules, building on the 2014 transfer of regulatory oversight to the FCA.

Issues with the CCA and approach to reform

HMT considers that key challenges with the CCA include that it is:

• Prescriptive, confusing and duplicative, e.g., confusing customer disclosures such as statutory references in documents and  technical legal language, potentially leading to poor outcomes for consumers. Some provisions prevent firms adapting information to customer needs.
• Inflexible, e.g., it can be difficult for firms to develop new products due to the rigidity of certain definitions and the prescriptive information requirements attached to them.
• Complex, with conduct requirements being spread across multiple sources with overlapping requirements, e.g., a prescriptive arrears and default process in the CCA as well as further requirements on arrears under CONC 7 of the FCA Handbook.
• Disproportionate, e.g., sanctions for non-compliance do not focus on consumer harm, or ensuring good outcomes.

HMT's proposal includes:

• Mass repeal – Many of the remaining CCA provisions and much of the associated secondary legislation will be repealed, provided that a similar outcome can be provided (where desirable) by FCA rules or other protections under FSMA 2000.
• Re-casting – The FCA will be responsible for re-casting conduct requirements, where appropriate, in its Handbook. It is not intended that CCA provisions will be precisely replicated in the FCA rules; instead, the FCA will take a view on the appropriate requirements to put in place, considering its statutory objectives and its existing principles and rules. The aim is to create a more flexible regime in FCA rules with more outcomes-based principles and less prescription, allowing firms to tailor products and consumer journeys to achieve good outcomes, in line with the broader FCA Consumer Duty.

In delivering the reforms, the government intends to be guided by five key principles:

• Proportionate – levels of consumer protection will need to be balanced with the need to ensure that the reform places proportionate burdens on business.
• Aligned – Consumer credit regulation should broadly align with the style and substance of current financial services regulation, whilst recognising that, due to the nature of consumer credit, a tailored approach may be required in specific areas.
• Forward-looking – the regulatory landscape should be adaptable to future ways of delivering credit to consumers and to the needs of consumers and businesses.
• Deliverable – The government is conscious that significant change may be required to internal processes and will ensure that adequate time is given for changes to take effect.
• Simplified – The reforms are intended to simplify and modernise ambiguous technical terms used in the CCA, clarify protections that are available for consumers, and make it easier for firms to communicate these protections and comply with requirements placed on them.

Phase 1: The key proposed changes

Information requirements

The proposed changes in respect of information requirements relate to various stages of the consumer journey, including pre-contract, post-contract, and arrears and default information. These proposals seek to address the overly prescriptive nature of information requirements under the current regime, which the government believes should instead be guided by the FCA Principles for Businesses (Principles) and Rules; in particular, the Consumer Duty. Given its focus on consumer outcomes, rather than prescription, the Consumer Duty is expected to play a key role in delivering a new consumer credit regime that is malleable enough for an evolving credit landscape. The requirements would be moved to the FCA Handbook, following a review by the FCA (and consultation as necessary) which would allow for greater flexibility in amending information requirements in the future.

Specific proposals for requirements to be repealed include:

• Small agreements (s17) (agreements for credit not exceeding £50, other than a hire-purchase or conditional sale agreement) – the aim is to remove an inconsistency between lenders offering interest-bearing credit not exceeding £50 and FCA rules in relation to BNPL agreements.
• Modifying agreements (s82)1)), and electronic disclosure (s 176A)) – eliminates the need for lenders to re-issue disclosure documentation when the terms of an agreement need to be amended; instead, lenders can agree changes with consumers more flexibly. Consumers would still be protected by the FCA Consumer Duty, contractual principles, and the Consumer Rights Act 2015.
• Multiple agreements (s18) – Originally designed to cover scenarios where a single credit agreement covers more than one type of credit or financial arrangement, these requirements are now considered 'unduly complex' and 'hard to comply with', leading to documents which are unclear or hard to understand, or otherwise avoiding innovation in products with multiple parts.
• Electronic disclosure (s176A) – This requires explicit consumer consent for the electronic transmission of documents; however, stakeholder feedback to date has indicated that the provisions lack flexibility.
• 'Gone away' consumers – There are current requirements for firms to send documents to the last known address, even if the consumer no longer lives there. This is seen as inconsistent with the GDPR and the Data Protection Act 2018.

Sanctions

Within the current CCA regime, non-compliance with certain information requirements can result in severe sanctions, e.g., if an arrears notice or annual loan statement does not contain the correct information, the lender may be unable to enforce the loan agreement during the period of non-compliance, i.e. until the breach has been remedied. Sanctions relating to enforceability were extended in the CCA 2006, which also introduced disentitlement sanctions. For certain breaches such as non-compliant arrears notices and annual statements, the consumer has no liability for interest or default sums charged during the period of non-compliance.

Whilst there was broad support for sanctions in HMT's engagement with consumer groups, industry groups took a different view, arguing that sanctions were disproportionate, led to poor consumer outcomes, were a barrier to innovation and led to legal uncertainty, e.g., there is a lack of clarity around the meaning of unenforceability and firms continue to take action, including demanding payment and issuing default notices.^[1]

The 2014 changes to bring consumer credit within the FCA regime, meant that the FCA Handbook Principles and Rules applied, e.g., the FCA requirement that communications be clear, fair and not misleading.

Additionally, the Consumer Duty, the rules and guidance within the FCA Dispute Resolution: Complaints Sourcebook (DISP), and the ability for consumers to take their complaint to the FOS (which has been in place since April 2007), may be considered to provide reasonable consumer protection. However, the FCA's Retained Provisions Report 2019 concluded that it would not be possible for the FCA to replicate or replace the sanctions in the CCA under its current rule-making powers.

Overall, the government considers that sanctions may not be compatible with the FCA's approach to proportionate regulation and would be inconsistent with an outcomes-based regulatory approach, as they would need to attach to prescriptive rules. The government has concluded that sanctions are not needed in the event of a breach of requirements and that 'the existing FCA regime and court process provides robust consumer protection'.

Criminal offences

Criminal offences are attached to certain provisions in the CCA 1974, including ss 48 – 49 (canvassing off trade premises), s 50 (circulars to minors), ss 157 – 160 (credit reference agencies).

The FCA has stated that it cannot, under its current rule-making powers, reproduce criminal offences in FCA rules.

The Phase 1 consultation does not set out concrete proposals in respect of criminal offences attached to the CCA. Instead, it sets out options, which consider previous views from consumer groups (with some viewing them as obsolete whereas some argue that retaining the offences acts as a deterrent against harmful practices), as well as the Ministry of Justice's policy that unnecessary offences should be repealed, and whether the offences are no longer needed given the FSMA regulatory toolkit.

The options include:

• repealing all the criminal offences in the CCA, allowing the FCA to take enforcement action where possible; or
• keeping all the criminal offences in the CCA; or
• repealing all criminal offences (allowing the FCA to take enforcement action where possible) except those that relate to minors and canvassing off trade premises where criminal offences would remain.

Next steps and Phase 2

After the consultation has closed, HMT will consider the feedback and will issue the government's response. HMT aims to subsequently publish a further consultation on Phase 2 of the CCA Reform – the FCA's regulatory initiatives grid suggests that this will be in Q1 2026.

The Phase 2 consultation will consider:

• consumer rights and protections (identifying where similar outcomes could be delivered by the FCA rulebook or where they will need to be retained or updated in legislation, including s 140A, which allows for claims for unfair relationships);
• scope and key definitions (in particular, on consumer hire and business lending);
• consequential changes to other legislation (e.g., the Regulated Activities Order, Payment Services Regulations 2017 and the Financial Services (Distance Marketing) Regulations 2024

As part of its Phase 2 work, HMT will explore transitional provisions to ensure a smooth transition to the new regime. This work will consider:

• the extent to which repeal of any CCA provisions will substantially interfere with consumer and firm rights for pre-existing agreements;
• whether the impact of removal of any CCA provisions would be acceptable and would not adversely impact the robust consumer protection that the consumer could reasonably expect to enjoy when the agreement was originated; and
• whether any CCA provisions should, or could, be retained for historic non-compliance under pre-existing agreements, or whether they could be sufficiently covered elsewhere in legislation or FCA rules.

Timeline of reform activity

• March 2019: FCA published Review of retained provisions of the Consumer Credit Act: Final Report
• February 2021: FCA published The Woolard Review - A review of change and innovation in the unsecured credit market
• June 2022: Government announced its intention to overhaul the CCA
• December 2022: HMT launched a public consultation on the strategic approach to the reform, which closed on 17 March 2023.
• July 2023: Government published its response to the December 2022 consultation
• May 2025: Government released the Phase 1 consultation on reform of the CCA.
• Q1 2026: Phase 2 consultation expected (according to the latest regulatory initiatives grid).