- Landmark legislation, first passed over 50 years ago,
modernised to reflect how people use credit today.
- Changes will mean consumers will receive clearer information
when using credit cards, loans and overdrafts – helping them make
smarter financial decisions.
- Reforms support innovation and growth, giving firms the
freedom to develop new products while maintaining strong consumer
protections.
Consumers who take out loans, credit cards or overdrafts are
expected to benefit from clearer information about costs and key
terms, helping them understand their options and make informed
financial decisions – thanks to major reforms announced today (14
May).
While some updates have been made over the years to the Consumer
Credit Act - first passed in 1974 - many of the core rules have
not kept pace with the digital financial products and services
that millions of people use every day.
Today's announcement will be the first step in moving many of the
CCA's detailed, prescriptive requirements out of the legislation
and into the Financial Conduct Authority's (FCA) rulebook –
making them easier to update as technology evolves.
The new regulations will be informed by consumer testing and kept
under review as products and technology changes. This should mean
that people using credit cards, loans, overdrafts or other
borrowing products will benefit from clearer and better-timed
information to help them understand their options and manage
their finances with confidence.
The reforms, part of the Financial Services Bill introduced in
the King's Speech, will make information about credit products
clearer, ensuring it genuinely helps people make informed
decisions and supports vulnerable consumers who may find jargon
more challenging.
Economic Secretary to the Treasury and City Minister,
said:
“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.”
Robust consumer protections in the CCA will be maintained to the
highest standards and the FCA has a wide range of enforcement
powers, including the ability to fine firms that break the rules.
Firms will benefit from a more flexible framework that allows
them to develop new products and use new technology to serve
their customers better. Rather than working around rules designed
for a world before smartphones and digital banking, businesses
will operate under a regime that can adapt as the financial
sector continues to innovate.
Peter Tutton, Director of Policy, Research and Public
Affairs, StepChange Debt Charity, said:
“Our thirty years of experience providing free debt advice has
shown us just how important clear and usable information about
credit agreements is for consumers. What's more, for those
struggling with managing credit repayments, it is vital that
consumers can make informed choices about products and know how
to seek help when it is required.
“Whilst the Consumer Credit Act contains important and much
needed consumer protections, new steps to move communication
requirements into FCA rules allows flexibility and a test and
learn approach that will offer better outcomes to consumers and
reduce harm around debt.”
Chris Woolard CBE, Chair of The Woolard Review and
Partner at EY, commented:
“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.”
Eric Leenders, Managing Director of Personal Finance, UK
Finance:
“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.”
Notes to editors
- The Government today published a policy statement
setting out the final approach to CCA reform, alongside its
response to the Phase 1 CCA reform consultation. Both documents
are available on GOV.UK.
