The UK Government has announced plans to reform the Consumer Credit Act, aiming to make consumer credit rules 'fit for the digital age'. The changes are expected to benefit people who take out loans, credit cards, or overdrafts by providing clearer, more accessible information.
Modernising Outdated Rules
Economic Secretary to the Treasury and City minister Rachel Blake stated that the Consumer Credit Act was written for a different era. The reforms, part of the Financial Services Bill introduced in the King's Speech, will shift many detailed requirements from the Act into the Financial Conduct Authority's (FCA) rulebook, making it easier to update them as technology evolves.
The Government emphasised that businesses will operate under a regime that can adapt as the financial sector innovates, rather than working around rules designed for a world before smartphones and digital banking.
Clearer Information for Consumers
The reforms will make information about costs and key terms clearer, supporting people who may find financial jargon challenging. The new regulations will be informed by consumer testing and kept under review as products and technology change.
Peter Tutton, director of policy, research and public affairs at StepChange Debt Charity, welcomed the move, stating that while the Consumer Credit Act contains important consumer protections, new steps to move communication requirements into FCA rules allow flexibility and a 'test and learn' approach that will offer better outcomes and reduce harm around debt.
Industry Reaction
Chris Woolard, chairman of the Woolard Review and partner at EY, noted that modernisation of the Act to support better outcomes for both consumers and firms was a key recommendation of his review of the unsecured credit market. He described these first steps as welcome.
Eric Leenders, managing director of personal finance at UK Finance, said: '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.'
The Government confirmed that consumer protections in the Consumer Credit Act will be maintained to the highest standards, and the FCA retains a wide range of enforcement powers, including the ability to fine firms that break the rules.
