On 11 July 2023, HM Treasury published a response to its consultation on reforming the Consumer Credit Act 1974 (CCA). The consultation was published on 9 December 2022 as part of the Edinburgh Reforms. As well as providing an overview of the feedback to the consultation, the response document also outlines the government’s proposed next steps.
The response notes that overall, stakeholders were supportive of reforming the CCA and the government plans to move forward with an ‘ambitious overhaul’ of the CCA. It believes that reform will facilitate innovation in the credit sector, increase accessibility of credit products, and contribute to growth in the sector and the economy more broadly. The government also sees this as an opportunity to bolster existing consumer protections to ensure customers remain adequately protected in a modern and increasingly digital economy.
The government plans to develop proposals that move the majority of the CCA into the Financial Services and Markets Act 2000 (FSMA) model. This will involve repealing much of the CCA and recasting it in the FCA Handbook. However, the government recognises that there may be specific aspects of consumer credit regulation that may warrant legislative-based provisions.
The consultation was the first stage in the reform process, and the response highlights that, due to its scale and complexity, CCA reform will take a number of years to deliver. It will likely require primary legislation, a detailed rulemaking process by the FCA (supported by a Cost Benefit Analysis), and appropriate transitional periods to allow industry to prepare and adapt to new rules.
As a next step, the government plans to undertake policy development to produce more detailed proposals, with a view to publishing a second stage consultation in 2024 to seek comment from stakeholders. In the meantime, it intends to engage further with stakeholders to inform its proposals, both through bilateral meetings and broader roundtables. This will help to inform the overall design of the new regime, and in particular the government is keen to take time to engage widely on cross cutting issues – such as the degree to which regulation should be outcomes based, an approach to sanctions, and the extent to which provisions should be removed from legislation – to develop a clear articulation of the desired end state for consumer credit regulation.
In relation to implementation timeframes, the response notes that it is currently difficult to provide a specific timeline given the early stage of reform. However, the government is keen to be open and transparent with stakeholders on this point and will seek to provide more detail in due course. It is also open to exploring whether a phased approach to implementation may be appropriate.