HMT consults on Consumer Credit Act Reform – Phase 1

HM Treasury (HMT) has published Phase 1 of its two-part consultation on reforming the Consumer Credit Act 1974 (CCA), accompanied by an updated webpage. The proposals aim to modernise the CCA to better align with new financial products and technology while promoting a competitive consumer credit market which supports the growth of the UK economy. The new regime will repeal many of the CCA provisions, to be replaced with rules in the UK Financial Conduct Authority Handbook as part of a more flexible, outcomes-based approach. Further details can be found in our client bulletin, Goodbye old friend? HM Treasury consultation on Consumer Credit Act 1974 reform.

The consultation outlines the government's overall vision for a reformed regime and seeks views on the following proposals:

• Information requirements. All information provisions in the CCA and related regulations will be repealed, with necessary elements to be redefined as FCA rules. Rather than directly transferring existing requirements, the FCA will review and consult on new rules to ensure they align with its principles, including the consumer duty, and effectively govern the information provided to consumers.
• Sanctions for failure to comply with information requirements. Sanctions under the CCA will be repealed, given the existing FCA regime and Financial Ombudsman Service already offer strong consumer protection, with the FCA's broad supervisory and enforcement powers serving as a significant deterrent to non-compliance.
• Criminal offences. The government is exploring whether CCA criminal offences are still needed or whether they can be repealed due to the FCA's disciplinary powers, including under the Senior Managers Regime, and the existing criminal liability regime for breach of the general prohibition under the Financial Services and Markets Act 2000. HM Treasury's view is there may be value in retaining some or all criminal offences to serve as a deterrent. The consultation emphasises that repealing any CCA criminal offences would not signal endorsement of the activities but instead reflect confidence in the FCA's regulatory regime to offer strong deterrence and consumer protection. The deadline for comments is 21 July. HMT will publish Phase 2 of its consultation in due course, which will set out the proposed scope of regulation and certain key rights and protections, including section 75 on connected-lender liability and section 140A on unfair relationships. The FCA will also consult on changes to its rulebook in due course. In other consumer-related updates, you may also be interested in listening to our podcast on the FCA's recently published consultation paper under the Mortgage Rule Review, Mortgage Rule Review: First steps to simplify rules and increase flexibility.

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