UK Government launches consultation to reform Consumer Credit Act 1974

On 19 May, HM Treasury (HMT) launched a landmark Phase 1 consultation on reforming the Consumer Credit Act (CCA) 1974, marking a major step towards creating a modern, consumer-centric regulatory regime. The initiative, which runs until 21 July 2025, proposes a significant overhaul of outdated legislation, aiming to shift regulatory powers from prescriptive statutes into the more flexible and agile FCA rulebook.

This consultation coincides with the Treasury’s response to the regulation of Buy-Now, Pay-Later (BNPL) products and forms part of a broader government strategy to promote innovation and enhance the competitiveness of the UK’s financial services sector.

“The CCA has served the UK well for many decades and continues to provide important protections, but it has failed to keep up with developments in the market and the changing ways in which people engage with credit. As a result, the regime is confusing and burdensome for firms, stifling innovation and is not delivering the best outcomes for consumers.

“The consultation sets out the Government’s proposals to move much of the CCA out of regulation so that it sits in the more agile rulebook of the FCA. The proposals aim to create a modern, agile and proportionate regulatory regime for consumer credit that is equipped to provide robust protection for consumers. A further consultation will follow in due course, covering rights and protections, scope and definitions.

“Overall, reforming regulation for firms while ensuring robust consumer protection will unlock the full potential of the consumer credit sector. This is an important milestone in delivering the Government’s plan to go further and faster to drive economic growth through the Plan for Change by supporting our consumer credit sector to innovate and become a driving force in delivering economic growth and enhancing competitiveness.”

What the Phase 1 consultation covers

Information requirements: The Government proposes repealing all information disclosure rules currently embedded in the CCA and moving relevant obligations into FCA rules. This would allow for a more flexible, proportionate framework that focuses on good consumer outcomes, particularly in the digital age.

Sanctions: The existing automatic sanctions, such as agreements becoming unenforceable due to technical breaches, are seen as disproportionate and outdated. The consultation suggests removing these and relying instead on the FCA’s supervisory and enforcement powers, including tools introduced under the Consumer Duty and Senior Managers Regime.

Criminal offences: The paper explores whether to repeal, retain, or partially retain the criminal offences under the CCA. Options include keeping only those related to particularly harmful practices, such as credit promotions to minors or off-premises canvassing, while removing outdated or redundant offences.

Looking ahead: Phase 2

The upcoming Phase 2 consultation, expected in Q1 2026, will address: consumer rights and protections; scope and exemptions; and key legal definitions. This phase is expected to involve more nuanced policy decisions and could reshape the regulatory landscape even further.

The Government’s move to reform the CCA signals a profound shift toward a more responsive, efficient, and innovation-friendly consumer credit regime. Stakeholders are encouraged to engage with the consultation to ensure a balanced outcome that supports consumer protection while fostering growth and competitiveness in the financial services sector.