First stage CCA reform consultation launched

HM Treasury published a consultation on the modernisation of consumer credit legislation on 9 December 2022, opening the first stage of reform of the Consumer Credit Act 1974¹. The consultation ran from 7:30am on 9 December 2022 to 11:59pm on 17 March 2023¹. The government had announced its intention to reform the Act on 16 June 2022¹.

The Consumer Credit Act 1974 governs the regulation surrounding billions of credit card purchases, personal loans and consumer hire agreements made by UK consumers every year, according to the consultation¹. The government said it intended the reform to facilitate innovation in the credit sector and increase accessibility of credit products, contributing to growth in the sector and the economy more broadly, and described it as an opportunity to bolster existing consumer protections so that customers remain adequately protected in a modern and increasingly digital economy¹.

The first stage asked stakeholders for input on the strategic direction of reform¹. It also asked how the consumer credit regulatory environment could be changed to ensure optimal performance of regulation surrounding customer communications, consumer protections and sanctions for firms that do not adhere to regulatory standards, and how the reform should approach the accessibility of credit and financial inclusion¹.

The consultation has concluded¹. On 10 July 2023 the government published a response to the consultation, which gives an overview of the feedback and outlines proposed next steps¹. Overall, stakeholders were supportive of reforming the Act, and the government said it plans to move forward with an ambitious overhaul¹. As a next step it said it would undertake policy development to produce more detailed proposals, with a view to publishing a second stage consultation in 2024¹. The response document carries the reference ISBN 978-1-916693-07-4¹.

Why it matters for households

The Act sets the framework for much of the consumer credit people use, including credit cards, personal loans and consumer hire agreements¹. The consultation covered how firms communicate with customers, what protections apply and what happens when firms do not meet regulatory standards, as well as access to credit and financial inclusion¹. Any changes would follow further policy development and a second stage consultation, which the government said it intended to publish in 2024¹. No changes to the rules took effect from the first stage consultation itself, which has concluded¹. The consultation page does not set out how individual products, rates or agreements would change, and no such detail has been reported¹.

What happens next

The government said it would undertake policy development to produce more detailed proposals, with a view to publishing a second stage consultation in 2024 to seek comment from stakeholders¹. The first stage consultation closed on 17 March 2023 and the response was published on 10 July 2023¹.