UK accelerates Consumer Credit Act reform for the digital age

The UK government has confirmed its approach to reform of the Consumer Credit Act 1974 (CCA), following its consultation in May 2025. The changes are intended to modernise the consumer credit regime, with less prescription, more flexibility and more scope for innovation, while maintaining robust consumer protection. 

Key elements of the CCA and secondary legislation will be repealed. Provisions deemed unnecessary in today's credit market will fall away, while others will be recast in the Financial Conduct Authority's (FCA) rules, with amendments as needed. This is not expected to be a simple copy-and-paste exercise. 

The pace of change is accelerating, with the government's planned phase 2 consultation no longer proceeding. Instead, HM Treasury is repealing a number of provisions without further consultation, on the basis that they will be recast into FCA rules as appropriate. Certain CCA provisions giving rise to key rights and protections will be retained, pending further policy work.

The government will bring forward the changes in legislation as part of the Financial Services and Markets Bill announced in the King's Speech on 13 May. There will be a transitional period to allow firms to prepare and to give time for the FCA to consult on its new rules. The timescale is to be determined.

Information requirements 

As expected, the majority of information requirements in the CCA and accompanying regulations will be repealed and recast (where appropriate) into FCA rules.

It is unlikely that the pre-contract consumer credit information, or PCCI, document, previously the EU-mandated standard European consumer credit information or SECCI, will reappear in the FCA framework. The regulator's existing rules, requiring adequate pre-contractual explanations for credit agreements, are expected to be extended to apply to hire agreements. However, it is likely the FCA will introduce new rules regarding content of agreements, provision of copies, and withdrawal rights. 

The requirement for both parties to "sign" a document "embodying" the terms of the agreement is being repealed, paving the way for the FCA to enable more flexibility in digital journeys.

The much-maligned requirements to send annual statements for fixed-sum loan agreements, notices of sums in arrears and default notices adhering to strict form and content requirements are all being repealed. The FCA is likely to introduce higher-level, less prescriptive rules, with the focus on firms seeking to ensure good outcomes for their customers in terms of transparency and information provision.

The lender and owner's duty to give notice before early termination or termination of an open-ended credit agreement is also being repealed. These requirements are expected to appear in the FCA framework.

Early settlement and termination 

The CCA provisions dealing with early settlement of loan agreements are being repealed. The FCA is likely to introduce rules to replace not only these provisions and the methodology for calculation of rebates where interest or fees have been charged upfront. 

This creates an opportunity to resolve areas of uncertainty: for example,  whether lenders who do not charge interest upfront but instead add interest to loan balances monthly in arrears can charge 30 or 60 extra days of interest on early settlement (both could be argued as correct currently); and whether upfront fees included in the annual percentage rate, or APR, can be rendered non-refundable in the event of early settlement under the terms of a loan agreement (again, arguable either way).

The hirer's limited right to terminate a hire agreement early is also being repealed, as is the right of a hire purchase or personal contract purchase customer to terminate early and pay no more than half the total price of the vehicle or goods. The latter is an extremely well-established mechanism in the motor finance industry, expected to appear in the FCA framework in the future.

Repealed sanctions 

The following sanctions are being repealed: automatic unenforceability except by order of the court, for example when there are breaches of agreement content requirements; and automatic unenforceability until the breach is remediated, together with disentitlement to interest and default sums. The latter currently applies to breaches of form and content requirements for arrears notices and annual statements for fixed-sum loans.

The government considers that these sanctions are no longer needed, as the existing FCA regime and court process provide consumer protection. 

What stays

The government has decided not to review the regulatory perimeter for credit and hire. Regulation of small and medium-sized enterprise (SME) lending and leasing will therefore continue to apply only where the SME is a sole trader, a partnership of up to three partners or an unincorporated body of persons that does not consist entirely of bodies corporate; and where the credit, or payments under the hire agreement, exceed £25,000.

The government has also decided not to seek to reform the CCA provisions on connected lender liability (sections 56 and 75) and unfair relationships (sections 140A-C). Both consumer protections are linked to how loans are categorised. It is therefore unsurprising that the government has also chosen not to review the static categories of credit: fixed sum or running account, restricted or unrestricted use, and debtor-creditor or debtor-creditor-supplier.   

The criminal offences currently set out in the CCA will all be retained as a deterrent. These cover canvassing off trade premises, advertising credit to minors, lenders failing to disclose details to credit applicants of credit reference agencies from which they have obtained information, pawnbroking, and the borrower or hirer failing to provide information about goods in their possession or control on request of the lender or owner.

Credit broking review

Alongside CCA reform, the government intends to review the regulatory regime for credit broking. Among other things, the review will look at the asymmetry resulting from the exemption of merchants offering buy-now pay-later products from credit broking regulation, which will create an uneven playing field for merchants offering other regulated credit products at point-of-sale. 

Osborne Clarke comment

HM Treasury's move to scrap the majority of the information requirements and associated sanctions will be welcomed by the industry, which has long raised issues with these rigid, prescriptive rules, not least their incompatibility with today's fast-moving digital environment. The repeal of sanctions will be particularly appreciated, as lenders have regularly fallen foul of them for highly technical breaches that do not affect customer outcomes. 

Repealing the archaic CCA approach to variation of regulated agreements will also be very welcome. Currently, any bilateral agreement between the parties must be treated as a new modifying agreement, creating unnecessary unenforceability risk and resulting in lenders tying themselves in knots to avoid any risk of a new agreement being made when showing forbearance.

Keeping the criminal offences on the statute book, which will leave consumer credit as an outlier in the financial services sector, is perhaps an example of the government balancing the views of consumer groups with those of industry. 

The regulatory perimeter remaining unchanged for now will be a relief to SME finance providers, particularly those offering products structured as a true sale and purchase of receivables, which will remain outside the ambit of regulation.

As we move into the implementation phase more quickly than expected, the pressure is on the FCA to design rules for this new era of consumer finance regulation, with the opportunity for firms to participate with forthcoming consultations.

The government has sidelined the thorniest issues for now – reform of the consumer protections in sections 56, 75, 75A and 140A-C. This buys e time to work through the complexities. Firms can continue engaging with government on these issues, including the tricky balancing act involved in any reform of section 75 protection.

If you would like to discuss the impact of CCA reform on your business, please contact our team of experts below.