On 19 May 2025, HM Treasury (HMT) published a consultation paper (CP) on Phase 1 of its proposals to reform the Consumer Credit Act 1974 (CCA).

Background

HMT previously consulted in December 2022 on proposals to reform the CCA, publishing its response in July 2023. In its response, HMT confirmed that it planned to develop proposals that would move the majority of the CCA into the Financial Services and Markets Act 2000 (FSMA) model, However, it also noted that due to its scale and complexity, CCA reform would take a number of years to deliver. 

Phased approach to reform

The current CP explains that HMT will take a phased approach to consulting on its policy approach, outlining its detailed proposals for a new regime across two consultations:

  • Phase 1 – the current CP, which outlines the Government’s overall vision for a reformed regime as well as its approach to information requirements, sanctions and criminal offences.
  • Phase 2 – a further consultation will set out how the Government intends to reform the scope of regulation and rights and protections under the CCA.

As there is substantial overlap between Phases 1 and 2, HMT aims to carry out both phases before implementing any changes. It notes that primary legislation and potentially secondary legislation will be needed for implementation of the changes, as well as a detailed rulemaking process by the FCA and appropriate transitional periods to allow industry to prepare and adapt to new rules.

Phase 1 proposals

The CP sets out information on:

  • The Government’s case for reforming the CCA and HMT’s broad vision for a reformed regime. This will involve repealing many of the CCA’s provisions and recasting them as appropriate into the Financial Conduct Authority (FCA) Handbook rules and principles, while recognising that some provisions may have to remain in legislation to ensure that key consumer protections are retained.
  • How CCA reform will be phased and key process points, including HMT’s approach to legislation and transitional provisions. An overview of key topics to be covered in each consultation for Phase 1 and Phase 2 is set out at paragraph 3.6 of the CP.
  • Proposals on information requirements, which HMT proposes to move from the CCA into the remit of FCA rules in order to achieve alignment with the Consumer Duty, flexibility in responding to changes in the markets, and the ability to be forward-looking and reflect digital technology developments. HMT notes that the FCA will consult in due course on changes to its Rulebook.
  • Proposals on sanctions, including the removal of the sanctions regime to bring the regulation of consumer credit into line with other financial services and to ensure liability for redress in the event of wrongdoing is commensurate with the level of consumer harm.
  • Proposals on criminal offences. In particular, HMT seeks to explore whether it is necessary to retain some or all of the criminal offences in the CCA, or whether they can all be repealed and replaced with additional FCA rules for authorised firms where appropriate, prohibiting each of the activities targeted by the offences.
  • Initial thoughts on issues to be considered in Phase 2.

Next steps

The CP closes on 21 July 2025. HMT will then consider the responses and plans to issue a response to the consultation followed by the Phase 2 consultation “in due course thereafter”.