UK consumer credit rules mark it out as regulatory outlier, says new FLA report

The UK’s consumer credit regulation and alternative dispute resolution arrangements (ADR) stands apart from its international peers, making it an outlier among OECD jurisdictions, according to new independent research published today by the Finance & Leasing Association (FLA) and global law firm Eversheds Sutherland.

Launched at the FLA’s Annual Insights Conference, the research compares the UK’s regime with those in France, Germany, Italy, Poland, and New York State (USA). It finds that no other jurisdiction studied has a consumer credit framework as complex, far-reaching, or open to interpretation as the UK’s.

“Until this point, we have not had authoritative and independent research to enable us to clearly compare the UK’s regulatory and ADR arrangements to those in similar markets,” said Stephen Haddrill, Director General of the FLA.

“The findings show a UK system of overlapping and contradictory requirements that complicate compliance and hinder innovation, all totally at odds with the growth agenda.”

Key findings: UK alone in key features

The UK is unique in having:

A multi-layered regime that blends law, regulatory rules and guidance, principles, and outcomes-focused regulation.
A private right of redress under FSMA s138D for breaches of regulatory rules.
A specific legal route for unfair relationship claims under Consumer Credit Act s140A.
Unenforceability sanctions for some breaches of credit law — only Italy shares this feature.

Notably, the research found that only the UK regulator, the FCA, routinely requires consumer remediation on a large scale. In contrast, regulators in the other jurisdictions, while focused on consumer protection, rarely impose similar obligations.

ADR arrangements: UK’s Ombudsman model is an outlier

The UK’s Financial Ombudsman Service (FOS) also sets it apart:

In other assessed jurisdictions, ombudsmen are required to apply the law.
In the UK, the FOS makes decisions based on what it considers “fair and reasonable”, even if firms have complied with existing law and regulation.
The UK is the only country requiring firms to apply past FOS decisions to similar future complaints — effectively giving the FOS quasi-regulatory authority.

This approach, the report warns, has led to inconsistent outcomes and created fertile ground for claims management firms to target the UK market with mass claims — often based on templated or unsubstantiated complaints. This trend is largely absent in the comparator countries.

“We are thrilled to have led on this important piece of work which comes at a critical juncture, underscoring the importance of our findings,” said Chris Busby, UK Head of Financial Services Disputes & Investigations at Eversheds Sutherland and co-author of the report.

“This research highlights the UK’s unique position in several respects and suggests that the regulatory framework in the UK regarding consumer credit is more restrictive compared to other jurisdictions.”

A call for fundamental reform

The findings arrive as both the Consumer Credit Act (CCA) and the FOS are under review. While these processes signal progress, the FLA believes deep-rooted reform is essential.

“There is a reason why the UK is the only country in the study targeted by claims management companies and claimant law firms. Inconsistent decision-making by FOS, along with its quasi-regulatory approach, have monetised the complaints process,” Haddrill said.

“Fundamental change is required if we are to reinstate certainty and clarity for firms, and prompt complaint resolution for customers.”

As the government’s growth and innovation agenda advances, the report provides timely evidence that the current UK model may be out of step and in need of realignment with international best practice.