2024 marked the 50th anniversary of the passage of the Consumer Credit Act 1974 (CCA). The world, the way people interact with their finances, and the consumer credit market is dramatically different today and the transformation in 50 years is vast. 79% of the public now hold at least one regulated credit product[1], new products such as Buy-Now, Pay-Later have come to the market, and digital technology has transformed how people use and take out credit.

It is perhaps not surprising that the legislation has not kept up. While it was well designed for its time, the CCA is increasingly under strain to deliver for the way consumers and firms now use and provide credit. The existing legislation and supporting regulations are poorly adapted to technology that was not envisaged 50 years ago. Successive updates over time have created a complex and prescriptive regime. In 2014, work was commenced to modernise the regime, with many CCA provisions being repealed and recast into Financial Conduct Authority (FCA) rules in the Consumer Credit Sourcebook, and the Government is continuing this work.

The Government has identified opportunities to deliver a modernised consumer credit regime which aims to ensure consumers receive clearer information at the right time, utilising technological developments, enabling them to make informed financial decisions throughout the consumer journey, as well as simplified rights and protections which achieve proportionate regulation whilst achieving robust consumer protection.

Modernising the CCA aims to achieve a more agile, flexible and proportionate regulatory regime that better supports innovation and economic growth alongside robust protection for consumers. This will enable firms to better tailor products and consumer journeys to achieve good consumer outcomes in line with the broader FCA Consumer Duty principle. It also brings consumer credit in line with the modern UK model of financial services regulation, whereby the scope of regulation is determined by parliament, with the detailed conduct rules set by the regulator.

The Policy Statement published today outlines the Government’s approach to reform of the CCA, which will be delivered via the forthcoming Financial Services and Markets Bill . The FCA is also publishing a statement on its direction regarding CCA reform measures announced today.

The policy statement is available at: https://www.gov.uk/government/consultations/consultation-on-consumer-credit-act-1974-cca-reform

[1] https://www.fca.org.uk/publication/financial-lives/fls-2024-credit-loans.pdf

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