The first major stripping out was back on April 1, 2014, when supervision for consumer credit was taken over by the Financial Conduct Authority (FCA), and we saw many provisions move from the CCA into the newly created Consumer Credit sourcebook (CONC). The CCA is now a shadow of its former self—a mere 167 live sections. For the past 11 years, we have been dealing with a patchwork of provisions with the requirements for running a compliant consumer credit business (one with enforceable agreements) spread across the CCA, its subsidiary legislation (and there are still many of those in force) and the FCA handbook for starters, with the toothiest of provisions regarding enforceability of agreements and offences remaining in the CCA.
Reform has been on the cards for years, with the promise of repealing many of the remaining CCA provisions and their associated secondary legislation. With the introduction and embedding of the FCA’s Consumer Duty, arguably the rigidity of the existing statutory obligations is no longer needed—firms should be free to innovate and be able to provide effective and smooth customer journeys with appropriate safeguards, without the fetters of requirements designed at a time when entering into a credit agreement using a phone while on a bus was the stuff of science fiction.
So, what are the key points and where should firms be focussing their efforts in responding to the consultation?
Our top five takeaways
Shift from statute to outcomes
As expected, the intention is to repeal many of the remaining 167 sections with a real shift to an outcomes-based regime. It is perhaps disappointing that HM Treasury hasn’t bitten the bullet to make a complete move—as set out below, it seems that a form of CCA may still exist, albeit in a very slimmed down version to support provisions that cannot be replicated under the Financial Services and Markets Act 2000 (FSMA) regime. It sits a little oddly that consumer credit borrowers may still, seemingly, benefit from more robust protection than mortgage borrowers, but what the consultation sets out is encouraging.
Two-phase policy programme
Reform is to be achieved through two distinct but overlapping phases. This consultation, phase 1, sets out the high-level vision and the plans for information requirements, sanctions and criminal offences. Phase 2 will tackle scope and perimeter issues, definitions, and the CCA’s hallmark rights and protections (for example, section 75 connected-lender liability and section 140A unfair-relationship provisions). The current plan is for both phases to be delivered through one primary legislative vehicle, but whether that is achievable in practical terms remains to be seen, and it is noted that no detail of the legislative timeline is currently available.
Repeal and recast
It has long been recognised that the existing statutory and rule-based information requirements are cumbersome at best, and lead to poor customer outcomes at worst, so the proposals to overhaul them are very welcome. There is a list of over 30 statutory disclosure provisions slated to be repealed covering everything from pre-contract credit information to the dreaded Notices of Sums in Arrears, and everything between and beyond. It will be for the FCA to decide on what the replacements will look like but, whatever that is, the Consumer Duty—in particular the “consumer understanding” outcome—will be integral to the final design.
Several other perennial pain points may disappear. The GBP50 “small agreement” carve-out, the baroque “modifying agreement” regime (not a moment too soon) and the complex “multiple agreement” rules are all earmarked for repeal. So too is the requirement for explicit consent for electronic disclosure, which feels long overdue in the digital age where many interact with their lenders through entirely online channels.
Automatic sanctions on the chopping block
As the consultation paper recognises, the industry has long been hampered by a “deliberately punitive approach” as regards automatic sanctions for breaches and it seems that common sense has prevailed with the government accepting the industry view that the current sanctions are not required given the strength of consumer protection within the regulatory perimeter. Automatic unenforceability, disentitlement to interest and default-sum disallowance is anachronistic given the FCA’s supervisory and enforcement powers, the complaints jurisdiction of the Financial Ombudsman Service, and the Consumer Duty. In news that will gladden many hearts, the proposed repeals include the draconian provisions in sections 77A(6) and 86D CCA (if you know, you know).
Criminal offences under review
The CCA sets out a number of offences which cannot be replicated by the FCA under FSMA but, helpfully, the FCA’s view is that they are not really needed, given the range of disciplinary powers it already holds, including the ability to require remediation and impose fines. Sadly, notwithstanding regulator support, the jury still seems to be out on this. It is clear that there is appetite to repeal offences that are no longer necessary, but the government also sees value in maintaining some or all of them for the deterrent effect, especially those that protect the most vulnerable. For this reason, one of the proposed options would preserve only the offences protecting minors and prohibiting door-to-door canvassing.
What’s next?
The consultation closes on July 21, 2025, and, once both phases are complete, the task of legislative drafting will begin, subject to parliamentary time. This does feel like the opportunity the industry has been waiting for to influence wholesale change to the legislative framework for consumer credit so that it is able to move fully into the digital age, promoting innovation and accessibility, while retaining the buffers required to provide appropriate consumer protection.
Taken together, if the proposals deliver on their promises, the reforms should see a shift from a half-century-old, detail-laden statute to a nimble, FCA-led regime designed for digital delivery, product innovation and robust, real-time consumer protection. On a more pressing note, however, could this be the end of the road for CCA-themed celebrations? We’ll have to wait and see.
