Government plans overhaul of consumer credit legislation

The government plans to overhaul consumer credit legislation, according to a monthly round-up of financial regulation news published on 5 July 2022¹. The same round-up reports that ministers plan to introduce new regulation covering Buy Now Pay Later credit and authorised push payment fraud¹.

On Buy Now Pay Later, the round-up states that the government plans to regulate the sector, but that Martin Lewis says it is taking far too long, particularly as one-third of users already cannot afford repayments¹. The round-up also links to reporting that more people are turning to high cost lenders¹.

On fraud, the round-up reports a 40% rise in automated push payment fraud, where criminals pretend to be someone you know, and says the government plans to introduce new regulation in response¹. It adds that UK credit card debt is ballooning for the wrong reasons¹.

The round-up places the consumer credit overhaul alongside the Financial Services and Markets Bill, described as the most important bill in the Queen's Speech and a bumper collection of financial regulation changes¹. It reports that the Treasury Select Committee is the latest to warn against an "international competitiveness" mandate for the UK's financial regulators, which is embedded in the Bill¹.

The round-up also reports that ministers are watering down audit reforms, that regulators are going to introduce capital rules for crypto, and that central bankers at the BIS say crypto risks are now materialising¹. It notes the first strategic plan from the new UK Infrastructure Bank¹.

Separately, the round-up reports that the Bank of England's climate stress tests show the financial services industry will lose hundreds of billions more if climate action comes too late, and that 39 insurers have stopped insuring new coal power projects, though a few remain, led by Lloyd's of London¹. It states that billionaires made more in the 24 months of the pandemic than they did in 23 years¹.

Why it matters for households

Consumer credit legislation sets the framework for loans, credit cards and other borrowing, so an overhaul would affect the terms on which households borrow and the protections attached to those agreements. The round-up does not set out what the overhaul would change, and no detail of the proposed reforms is given¹.

Buy Now Pay Later users are directly affected by the timing of regulation. The round-up reports that one-third of users already cannot afford repayments, and that Martin Lewis says the pace of rule-making is taking far too long¹. No commencement date for Buy Now Pay Later rules is given¹.

Victims of authorised push payment fraud are affected by the proposed new regulation, reported alongside a 40% rise in such fraud¹. The round-up does not state what the new regulation would require of banks or what reimbursement victims would receive¹.

The wider context is the Financial Services and Markets Bill, which the round-up describes as a bumper collection of financial regulation changes¹. The Treasury Select Committee's warning concerns an "international competitiveness" mandate for regulators embedded in the Bill¹. How that mandate would operate in practice for consumers is not set out¹. The Financial regulation in the UK: who makes the rules and how changes affect you guide explains how rules are made and changed.

What happens next

No timetable for the consumer credit overhaul, the Buy Now Pay Later rules or the fraud regulation is given in the round-up¹. The round-up is dated 5 July 2022 and covers developments in June 2022¹.