Category: Consumer credit

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Bill reforming the Consumer Credit Act 1974 has its first reading in the House of Lords

On 19 May 2025, Parliament’s website was updated to confirm that the House of Lords had its first reading of the Financial Services and Markets Bill (which is the Bill setting out the proposed reforms to the Consumer Credit Act 1974 (the CCA)). For those wanting to see the detail, the Bill has also been published.

Section 1 of the Bill sets out the key consumer credit changes (and the Bill covers many other financial services topics; more on those at some later point). Section 1(1) and Part 1 of Schedule 1 set out amendments to the CCA (for a summary of those, see our blog post from earlier this week). Section 1(2) and Part 2 of Schedule 1 set out “minor and consequential amendments to other legislation“.

We are currently waiting for a date for the second reading in the House of Lords.

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HM Treasury publishes policy statement on reform of the Consumer Credit Act 1974

Earlier today, on 18 May 2026 and in a rather unexpected development, HM Treasury (Treasury) published a press release and policy statement on reforming the Consumer Credit Act 1974 (the CCA) rather than publishing its proposed ‘Phase 2’ consultation paper. The Financial Conduct Authority (the FCA) also published a response to Treasury’s policy statement.

The devil is, of course, always in the detail but the headlines are:

– Treasury proposes to (a) repeal the majority of the pre and post-contract information requirements and recast them into FCA rules (by, presumably, adding provisions to CONC), (b) repeal the sanctions (being unenforceability without a Court order, unenforceability under the lender or owner fixes the position and disentitlement of interest and default fees for periods of non-compliance) and (c) keep criminal offences in the CCA.

– Treasury proposes to repeal and re-cast (where relevant and subject to consultation) a number of provisions in FCA rules (but will keep some things in legislation). These include (a) withdrawal and cancellation, (b) termination rights (including voluntary termination rights under Sections 99 and 100), (c) early settlement and rebates, (d) agreements to enter into future agreements being void, (e) securities and sureties, (f) interest not to be increased on default and (g) credit tokens and liability.

– Treasury proposes to keep a number of provisions. These include (a) CCA framework and definitions (including consumer credit agreements, the meaning of credit, running-account and fixed-sum credit, restricted and unrestricted use credit, debtor-creditor-supplier agreements, debtor-creditor agreements and consumer hire), (b) withdrawal of a prospective agreement under Section 57 of the CCA, (c) pawnbroking, (d) negotiable instruments, (e) time orders, (f) protected goods, (g) death of the debtor or hirer, (h) the provisions on credit reference agencies in Sections 157 to 160 of the CCA and (i) other provisions (being Sections 70 to 73, 93A, 102, 104, 126 and most of remaining provisions in Parts 9 to 12 of the CCA).

– Treasury will not be moving forward with a Phase 2 consultation. But it will consult in the future on other issues including ‘complex CCA provisions’ (being Sections 56, 75, 75A and 140A to 140C of the CCA);

– Treasury will be bringing forward legislation as part of the Financial Services and Markets Bill as announced in the King’s Speech on 13 March 2026 to enact its plans (see later).

– There will be transitional provisions to deal with the transfer from the old to the new.

The FCA says it intends to “consult on the key elements of the consumer credit framework previously set out in legislation, where we have the powers to do so, considering the whole consumer credit process” and its approach will be “underpinned by the Consumer Duty” (which is not, of course, a surprise). But Treasury was keen to make the point in its policy statement that the “Government does not expect that CCA provisions which are repealed and recast into FCA rules to be replicated exactly. Indeed, that is not the objective. Instead, the FCA will consider what appropriate requirements should be put in place, considering its statutory objectives, powers under FSMA and its existing rules including principles like the Consumer Duty“.

So we’ll all now need to wait with bated breath for both (a) the draft legislation and (b) the FCA’s consultation paper. But the timetable looks a lot shorter than perhaps everyone had expected.

If you have any questions, please contact your usual contact at Walker Morris LLP:

– Russell Kelsall | Partner & Head of Consumer & Motor Finance | M: 07811 805 702 | E: russell.kelsall@walkermorris.co.uk

– Jeanette Burgess | Managing Partner | M: 07968 114 901 | E: jeanette.burgess@walkermorris.co.uk

– Leanna Bradshaw | Director | M: 07944 091 982 | E: leanna.bradshaw@walkermorris.co.uk

– Paula Twist | Senior Associate | M: 07796 881 571 | E: paula.twist@walkermorris.co.uk

– Jessica Padget | Senior Associate | M: 07814 695 569 | E: jessica.padget@walkermorris.co.uk

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HM Treasury publishes ‘Phase 1’ consultation on consumer credit reform, and response to feedback on plans to regulate BNPL

Earlier today, on 19 May 2025, HM Treasury published:

– a press release and a ‘Phase 1’ consultation paper on reform to the Consumer Credit Act 1974;

– an update to its consultation and its response to the feedback to its consultation on regulating buy-now, pay-later products (BNPL); and

– a news story on its proposals to regulate buy-now, pay-later.

The ‘Phase 1’ consultation on reform seeks views on information requirements, sanctions and criminal offences. The deadline for responding is 21 July 2025.

On BNPL, HM Treasury “intends to lay the [statutory instrument] before Parliament shortly after this responsible is published”. Once the SI is made, the FCA will then have 12 months to draft, consult on, and finalise its rules for BNPL Lending. BNPL products will then be regulated from mid-2026. The FCA will shortly publish a consultation on its rules.

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King’s Speech makes no mention of consumer credit reform

Earlier today, on 17 July 2024, King Charles III delivered his King’s Speech setting out the areas of reform for the new Labour Government.

But any consumer credit firms or advisers looking for some mention of reform of the Consumer Credit Act 1974 will be disappointed. There was no mention of such reform either in the King’s Speech, or in the background briefing notes.

It therefore remains to be seen whether there will be any further consultation issued by HM Treasury. The Government’s website simply says that the “consultation has concluded“. No further updates have been added since 11 July 2023. But there is surely a long overdue need for reform: the current system is notoriously complex and often works in a way which does not promote innovation.

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Financial Conduct Authority publishes principles for developing credit information industry-led remedies

On 20 May 2024, the UK Financial Conduct Authority published principles for developing credit information industry-led remedies.

In December 2023, the FCA published its final report on the credit information market study. The FCA proposed that various remedies should be introduced by industry-led work (including input, where necessary, from the FCA).

The FCA’s final report expects the Credit Reporting Governance Board (the CRGB) will seek input to progress and implement industry-led remedies. The FCA has therefore published the following principles pending the CRGB’s formation:

1 Seek and consider input from all relevant stakeholder cohorts (including, but not limited to, stakeholder cohorts represented on the Interim Working Group (the IWG)).

2 Proactively consider how any steps or decisions might negatively affect the CRGB’s ability to decide longer-term policy or implementation options.

3 Consider how potential approaches or solutions align with the CIMS proposals, the emerging CRGB objectives being developed by the IWG and the Consumer Duty.

4 Specifically consider the impact on different firms (including small businesses) and consumers, including by taking into account effects on:

4.2 customers with characteristics of vulnerability, and

4.1 financial inclusion

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FCA publishes a portfolio letter to consumer lenders

On 20 March 2024, the UK Financial Conduct Authority published a portfolio letter to three portfolios in the consumer lending market: high-cost lending, ‘mainstream’ consumer credit lending and credit unions.

The FCA says it priorities to ensure markets function well are:

– reducing and stopping serious harm;

– setting and testing higher standards; and

– promoting competition and positive change.

For its promoting competition and positive change priority, the FCA has a focus on providing access to affordable credit. The FCA says firms should consider ways they can support customers (for example, using effective signposting) but not compromising standards. The FCA encourages firms to think about innovating and providing greater access to affordable credit.

For its reducing and preventing harm priority, the FCA says:

– firms must lend responsibility and sustainably: The FCA says it’s “more important than ever to ensure your firm makes sound affordability and credit-worthiness assessments”. Whilst the FCA has “seen some improvements, we remain concerned about sludge practices” (ie unreasonable barriers). Firms using artificial intelligence need to test its effectiveness. Re-lending most be done affordability, responsibility and sustainably.

– firms must ensure the price paid for a product or service is reasonable compared to the overall benefits: The FCA’s price and fair value requirements in consumer duty is a key development. The FCA acknowledges lending to certain cohorts can be greater and may lead to increased prices but firms should not “capitalise by increasing prices unfairly and offering products that do not provide fair value”. The fact that there is a price cap for high-cost short-term credit does not mean the cap provides fair value: it is a maximum rate.

– firms must support customers in financial difficulty: The FCA says “many firms were not considering or taking sufficient account of consumers’ individual needs or circumstances or providing appropriate tailored forbearance”. The FCA encourages firms to ensure it is acting in compliance with its rules and the Tailored Support Guidance (and new changes are likely to happen by the end of June 2024).

– firms must handle complaints and redress requirements effectively: The FCA says it remains “concerned” and expects “to see more widespread improvements in how firms handle complaints”. The FCA is currently processing a complaints multi-firm review involving a small number of high-cost lenders.

– firms must have appropriate systems and controls in place to mitigate risks of financial crime: The FCA acknowledges that the current market conditions increase the risk of illegal money lending and domestic financial abuse. Firms should improve their processes, procedures and practices.

– firms must have robust governance practices, ensuring effective oversight and risk management: The FCA says firms must have “robust governance practices guaranteeing effective oversight and rigorous risk management protocols to identify, monitor and manage operational risks”. The FCA says there are issues across the consumer lending market but failures are “particularly acute” in parts of the credit union and high-cost portfolios.

For the setting and testing high standards priority, the FCA reminds firms about the effect of the introduction of the consumer duty. The FCA says it is not “a once and done exercise”. The FCA also reminds firms of policy changes including the proposed reform of the Consumer Credit Act 1974, the introduction of product sales data returns and changes allowing credit unions to offer hire purchase, conditional sale and insurance distribution services.

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FCA joins with other regulators to warn firms about debt collection

On 18 March 2024, the UK Financial Conduct Authority published a news story calling on firms to improve debt collection practices. All of the regulators feel that this is particularly important given many consumers continue to feel cost of living pressures.

The news story also includes links to:

– a joint press release; and

– a copy of the joint letter dated 18 March 2024.

This joint letter follows on from a letter published on 28 June 2023 (see the press release and the joint letter dated 28 June 2023).

The latest joint letter makes the following points for financial services firms:

– firms should start from the position that customers in collections are highly likely to have characteristics of vulnerability and should follow FCA’s expectations under the consumer duty (including its finalised guidance) and its vulnerable customer guidance;

– the consumer duty strengthens existing requirements;

– there is foreseeable harm if a debt collection communication sent the customers are perceived to be intimidating or unsupportive (and communications should be tested)

– firms may want to encourage ‘warm’ handovers between frontline and specialist teams; and

– the FCA aims to publish its policy statement before June 2024 on its response to Consultation Paper 23/13.

The FCA reminds financial services firms (and this point should not come as any surprise) that debt collection rules and guidance apply to both debt collectors and to lenders taking steps to recover payments due under credit agreements or consumer hire agreements.

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FCA decides to investigate the use of personal guarantees given for certain small business lending

On 5 March 2024, the UK Financial Conduct Authority published a press release announcing it is investigating the use of personal guarantees given to lenders to support loans made to certain small businesses. The follows the Federation of Small Businesses making a ‘super-complaint’ to the FCA.

The FCA’s perimeter is, in fact, fairly limited for business lending. It only applies to such lending where (in broad terms):

– the borrower is an individual or a relevant recipient of credit (being a partnership of two or three persons not all of whom are incorporated, or an unincorporated body of persons which does not consist entirely of bodies corporate and is not a partnership); and

– the amount of credit is no more than £25,000.00.

The FCA will:

– collect data between April 2024 and June 2024 to understand when lenders entering into a regulated credit agreement are asking for guarantees;

– review samples of firms’ policies and procedures;

– work with the Financial Ombudsman Service to monitor the level of complaints; and

– consider whether lenders need further guidance in CONC.

The FCA has also published its response to the super complaint.

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New EU Consumer Credit Directive published

On 30 October 2023, the new EU Consumer Credit Directive (CCD2) was published in the Official Journal of the European Union.

The timeline is:

– CCD2 will come into force on 19 November 2023.

– EU member states must adopt, and publish, the regulatory framework to implement CCD2 by 20 November 2025.

– CCD2 will come into force on 20 November 2026 (and it will repeal the EU Consumer Credit Directive from 2008).

Because the United Kingdom is no longer an EU member state, it will not need to implement it. However, it remains to be seen to what extent any of CCD2 is implemented into UK law to ensure parity with EU law.

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Financial Services and Markets Act 2023 receives Royal Assent: impact for consumer credit firms

On 29 June 2023, the Financial Services and Markets Act 2023 received Royal Assent. It is often referred to as being part of the EU ‘bonfire’ legislation. From the date it comes into force, Section 1(1) of the Financial Services and Markets Act 2023 revokes the legislation listed in Schedule 1. This includes a number of provisions which make up the consumer credit regulatory framework.

We’ve been busy at Walker Morris Towers looking into the impact of Section 1(1) of the Financial Services and Markets Act 2023 on consumer credit firms. Here’s our one page summary. If you click on it, you’ll get a bigger version of it.

If anyone needs a PDF copy with the embedded links (shown in the image as underlining), please contact me, Jeanette Burgess, Leanna Bradshaw or Hasan Siddique.