- Landmark legislation, first passed over 50 years ago, modernised to reflect how people use credit today.
- Changes will mean consumers will receive clearer information when using credit cards, loans and overdrafts – helping them make smarter financial decisions.
- Reforms support innovation and growth, giving firms the freedom to develop new products while maintaining strong consumer protections.
Consumers who take out loans, credit cards or overdrafts are expected to benefit from clearer information about costs and key terms, helping them understand their options and make informed financial decisions – thanks to major reforms announced today (18 May).
While some updates have been made over the years to the Consumer Credit Act – first passed in 1974 – many of the core rules have not kept pace with the digital financial products and services that millions of people use every day.
Today’s announcement will be the first step in moving many of the CCA’s detailed, prescriptive requirements out of the legislation and into the Financial Conduct Authority’s (FCA) rulebook – making them easier to update as technology evolves.
The new regulations will be informed by consumer testing and kept under review as products and technology changes. This should mean that people using credit cards, loans, overdrafts or other borrowing products will benefit from clearer and better-timed information to help them understand their options and manage their finances with confidence.
The reforms, part of the Financial Services and Markets Bill introduced in the King’s Speech, will make information about credit products clearer, ensuring it genuinely helps people make informed decisions and supports vulnerable consumers who may find jargon more challenging.
Economic Secretary to the Treasury and City Minister, Rachel Blake said
People need to be able to make informed choices when applying for and using credit.
The Consumer Credit Act was written for a different era – we are creating a flexible regime fit for the digital age.
Robust consumer protections in the CCA will be maintained to the highest standards and the FCA has a wide range of enforcement powers, including the ability to fine firms that break the rules.
Firms will benefit from a more flexible framework that allows them to develop new products and use new technology to serve their customers better. Rather than working around rules designed for a world before smartphones and digital banking, businesses will operate under a regime that can adapt as the financial sector continues to innovate.
Peter Tutton, Director of Policy, Research and Public Affairs, StepChange Debt Charity, said
Our thirty years of experience providing free debt advice has shown us just how important clear and usable information about credit agreements is for consumers. What’s more, for those struggling with managing credit repayments, it is vital that consumers can make informed choices about products and know how to seek help when it is required.
Whilst the Consumer Credit Act contains important and much needed consumer protections, new steps to move communication requirements into FCA rules allows flexibility and a test and learn approach that will offer better outcomes to consumers and reduce harm around debt.
Chris Woolard CBE, Chair of The Woolard Review and Partner at EY, commented
Modernisation of the Consumer Credit Act to support better outcomes for both consumers and firms was a key recommendation of The Woolard Review of the unsecured credit market. These first steps, to enable clearer information and new products, are therefore welcome ones.
Eric Leenders, Managing Director of Personal Finance, UK Finance
UK Finance welcomes the government’s plans to modernise the Consumer Credit Act. Ambitious, forward-looking changes are needed to give consumers clearer, more accessible information, and lenders flexibility to provide new and innovative products. These reforms are an important step towards a simpler, future‑proofed regime with strong consumer protections in an increasingly digital world
NOTES TO EDITORS
- The Government today published a policy statement setting out the final approach to CCA reform, alongside its response to the Phase 1 CCA reform consultation. Both documents are available on GOV.UK
