UK regulator moves to simplify consumer credit financial promotion rules
Published on 27th May 2026
The FCA is dropping rigid rules, relying instead on the Consumer Duty to maintain standards in firms' consumer comms
At a glance
As part of its post-Consumer Duty review, the FCA is proposing to streamline the consumer credit financial promotion rules, targeting outdated or unnecessarily prescriptive provisions.
Some rules will be retained specifically to preserve consumers' private right of action for breach, which is not available for breaches of the Consumer Duty.
The regulator is also seeking input from industry on whether and how to reform the costs disclosure framework, including rules around representative APRs.
The Financial Conduct Authority (FCA) is consulting on simplifying the financial promotions rules for consumer credit, following the implementation of the Consumer Duty in July 2023. The regulator is moving to simplify some rules in the FCA Handbook, specifically in chapter three of the Consumer Credit sourcebook (CONC).
The changes aim to streamline the regime and give firms greater flexibility while maintaining appropriate consumer protection by removing requirements from CONC 3 that overlap with the Consumer Duty, which requires firms to act to deliver good outcomes including consumer understanding.
The deadline for comments on the proposed changes is 17 June, with the FCA's final policy expected later this year. Firms will have three months to implement the rules once they are finalised. On annual percentage rate (APR) requirements specifically, the FCA will decide whether to consult on specific changes once it has reviewed the industry responses.
Rule changes
The rules and guidance that the FCA plans to remove include examples of practices likely to contravene the "clear, fair and not misleading" rule, such as using fake endorsements or case studies, or using false or unsubstantiated claims about the firm's experience or pre-eminence.
The regulator plans to remove guidance on the meaning of "prominent" and requirements relating to transparency, understanding and balance. The FCA also proposes the removal of the restriction on certain expressions in financial promotions, such as "overdraft" unless the credit enable a customer to overdraw on a current account, and "interest-free" unless the total amount payable does not exceed the cash price.
Unchanged rules
The "clear, fair and not misleading" requirement is not being removed. While it overlaps with the Consumer Duty, the FCA wants to preserve consumers' ability to bring a private action for breach of this requirement, which is not available for breaches of the Consumer Duty.
An APR and a representative example will continue to be triggered in the same way as before. There are no proposals to change the content of the representative example, though these may follow depending on feedback to the discussion paper on costs disclosures.
The FCA is not proposing changes to the financial promotions rules applicable to credit brokers, high-cost short-term credit (also known as payday lending), peer-to-peer lending, or debt counselling and debt adjusting.
APR effectiveness
The APR is designed to ensure that consumers can compare the overall cost of different kinds of credit. It includes not only the pure interest element but also all other mandatory fees and costs. The calculation results in a percentage that reflects a single annualised cost of the credit.
In order to achieve this comparability, the calculation involves making assumptions that may not be realistic.
For example, where a credit product is an open-ended line of credit offering a series of three month instalment plans with a drawdown fee applicable to each, it must be assumed that the borrower draws down and repays the full credit limit four times over a year, incurring four fees.
Where a credit product is a short-term loan (say four months) with interest or fees, the APR calculation involves annualising those costs, making them look higher than they are in practice. An open-ended line of credit with a high annual fee will similarly produce an APR that can appear very high.
The FCA discusses a range of alternatives. These include allowing lenders offering shorter-term loans to show the cost of the loan in pounds and pence rather than showing an APR. It has also considered requiring advertising to show only the amount borrowed, the repayment amount, the total interest payable and the total amount payable; another alternative would be to combine this information with the APR.
The FCA has also asked whether the inclusion of a representative example supports consumer understanding, not only because it is not very compatible with all digital – such as social media – and audio formats, but also because of its perceived disproportionate complexity.
Representative APRs
When triggered, a representative APR must be shown. This is an APR at or below which the advertiser reasonably expects that credit will be provided under at least 51% of the credit agreements that will be entered into as a result of the promotion. The FCA is asking whether the 51% threshold should be changed.
Before implementation of the EU Consumer Credit Directive (CCD) in 2010, a "typical" APR had to be shown: the APR that at least 66% of borrowers were expected to be given. Some in the industry have lobbied government to take the opportunity of being outside the EU to move back to the pre-CCD position.
The FCA, to its credit, has also put forward other options, such as keeping the representative APR at 51% but requiring firms to show the highest APR that might be charged, or guiding firms under the Consumer Duty to explain better what the representative APR means. There is also the option to remove the requirement to include the word "representative" when there is only one APR that can apply.
Osborne Clarke comment
The removal of some prescriptive and outdated financial promotions rules in CONC is likely to be well-received by firms in principle, though some initial work will be needed to implement the changes and benefit from the increased flexibility. Our only concern is that removal of the restriction on calling credit products "overdrafts" is likely to lead to firms offering "overdrafts" in conjunction with electronic money accounts. From a policy perspective, the FCA will need to give some thought as to whether it wants to allow this.
On costs disclosures, we agree that the FCA should tread carefully. The FCA's research is instructive: all the evidence suggests that APRs remain a useful comparator metric, despite poor consumer understanding of exactly what an APR represents. There is nothing to stop advertisers from showing the cost of a loan in pounds and pence already, as well as the APR, to improve transparency and understanding. However, reading between the lines, it seems to us that the direction of travel may be that the FCA will remove the representative example and instead require firms to include additional, simpler information alongside the APR.
Alex Brammar, a trainee solicitor with Osborne Clarke, contributed to this Insight.
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