The Consumer Credit Act Reform – Phase 1 Consultation, published by HM Treasury in May 2025, outlines the UK Government’s initial proposals to modernise the Consumer Credit Act 1974 (CCA). This reform aims to create a more agile and consumer-focused regulatory framework that aligns with the contemporary credit market and technological advancements.
Background and Rationale
The CCA, enacted over 50 years ago, governs consumer credit in the UK. Since its inception, the credit market has evolved significantly, with the non-mortgage lending market exceeding £200 billion and 84% of the public holding credit products. Technological innovations, such as digital lending platforms and Buy-Now-Pay-Later (BNPL) services, have transformed consumer interactions with credit. However, the existing legislation has become complex and outdated, necessitating a comprehensive review to ensure it remains fit for purpose in the modern financial landscape.
Key Reform Areas in Phase 1
1. Information Requirements
- Simplification and Modernisation: The consultation proposes simplifying pre-contractual and contractual information to enhance consumer understanding and engagement.
- Digital Communication: Recognising the shift towards digital channels, the reform seeks to accommodate electronic communications while ensuring essential information is effectively conveyed.
2. Sanctions and Criminal Offences
- Proportionality and Clarity: The government aims to reassess existing sanctions to ensure they are proportionate and clearly defined, reducing unnecessary burdens on firms while maintaining consumer protections.
- Alignment with FCA Regime: Efforts will be made to harmonise sanctions with the Financial Conduct Authority’s (FCA) regulatory framework to avoid duplication and confusion.
3. Repeal of Outdated Provisions
- The consultation includes a list of CCA provisions proposed for repeal in Phase 1, targeting clauses that are obsolete or redundant in the current market context.
Implementation and Future Phases
- Phased Approach: The reform will be implemented in stages, with Phase 1 focusing on immediate priorities and subsequent phases addressing more complex areas.
- Collaboration with Stakeholders: The government emphasises the importance of engaging with industry stakeholders, consumer groups, and the FCA to ensure the reformed framework is effective and balanced.
- Timeline: While specific timelines for future phases are not detailed, the government expresses a commitment to progressing reforms promptly to deliver tangible benefits.
Accessing the Full Consultation Document
For a comprehensive understanding of the proposed reforms, stakeholders and interested parties are encouraged to review the full consultation document:
Consumer Credit Act Reform – Phase 1 Consultation (PDF)
