Reforming the Consumer Credit Act: what could change for borrowers

The Consumer Credit Act 1974 is the law behind most of the everyday rights people have when they borrow money: the right to a refund from your card lender when a purchase goes wrong, the right to settle a loan early with a rebate, the right to proper notices before a lender takes action against you, and the rules that can make a badly drafted agreement unenforceable. The government has now announced it will repeal much of this law and rebuild the rules inside the FCA's rulebook¹.

The reform is not a single event. It began with a consultation in December 2022, and the government has said that due to the scale and complexity of the change it expects the process to take a number of years³. In the meantime, the Act remains in force: the legislation.gov.uk version is up to date with all changes known to be in force on or before 28 September 2026⁴. Nothing in this page is a prediction of what the final rules will say, because much of that has not been decided.

What the Consumer Credit Act does for borrowers today

The Act governs the regulation surrounding billions of credit card purchases, personal loans and consumer hire agreements made by UK consumers every year¹. It was passed in 1974 to establish, for the protection of consumers, a new system of licensing and other control of traders concerned with the provision of credit, or the supply of goods on hire or hire-purchase, and their transactions¹³. In other words, it is the framework that says who may lend to consumers, what they must tell you, and what happens when things go wrong.

The Act has been amended repeatedly. The Consumer Credit Act 2006 amended the 1974 Act and extended the ombudsman scheme under the Financial Services and Markets Act 2000 to cover licensees under the Consumer Credit Act, which is why complaints about lenders and brokers can go to the Financial Ombudsman Service today¹⁴. In 2004 the Act was amended to allow the electronic conclusion of agreements, and more than 50% of new credit card agreements are now arranged online³.

The government's criticism of the Act, as set out in the reform documents, is that it is prescriptive, confusing and duplicative, requiring credit providers to communicate with customers in technical language which they may not understand². That criticism is the driving force behind the reform: the rules work, the argument runs, but they were written for a paper-based lending market and now sit awkwardly alongside the FCA's own rulebook.

Which borrowing the Act covers, and which it does not

The Act's protections apply to regulated consumer credit agreements, but there are significant exclusions. Part V of the Act, which contains the Section 75 protection, does not apply to a non-commercial agreement or to a debtor-creditor agreement enabling the debtor to overdraw on a current account¹⁵. So an ordinary overdraft does not carry Section 75 protection, and neither does purely non-commercial borrowing.

Some agreements are exempt from regulation altogether. The Act does not regulate certain consumer credit agreements secured on land where the creditor is a specified body, building society or authorised institution¹⁶, and further exemptions were made by order in 1999¹⁷. Mortgages secured on land therefore sit under different rules from unsecured personal borrowing.

Buy now pay later is the newest arrival. The FCA started regulating Deferred Payment Credit, often known as buy now pay later, on 15 July 2026¹². But the way it was brought in matters: the 2025 regulations amend the Act so that provisions including sections 55 (disclosure of information), 60 (form and contents of agreements), 76 (duty to give notice before taking certain action), 86B (duty to give notice of sums in arrears under fixed-sum credit agreements), 86E and 87 (need for default notice) will not apply to regulated deferred payment credit agreements¹⁸. Section 75 does apply, which is covered below.

Business borrowing is a partial case. The Act covers business lending, but the Consumer Rights Act 2015 does not apply to business customers, so business lending covered by the Consumer Credit Act is excluded from that Act's scope³. A sole trader's protections therefore depend on which law is doing the protecting.

The government's plan to repeal and replace much of the Act

The reform has moved through several stages. On 16 June 2022 the government announced its intention to reform the Act, and the consultation published on 9 December 2022 was the first stage, asking stakeholders for input on the strategic direction¹. Responses were invited by 17 March 2023³, and on 10 July 2023 the government published its response, with a view to publishing a second stage consultation to seek further comment¹. In May 2025 the government confirmed its intent to reform the Act²⁰, and in May 2026 it announced it would repeal much of the law governing consumer credit².

The government's stated intention is that the reform will facilitate innovation in the credit sector and increase accessibility of credit products, contributing to growth in the sector and the economy more broadly¹. It sits alongside wider policy goals: the Money and Pensions Service's UK Strategy for Financial Wellbeing includes a "Credit Counts" goal of 2 million fewer people often using credit for food and bills by 2030²¹.

The most important caveat comes from the FCA itself. It has said that some of the protections in the Act which the government plans to repeal are significant and that it would not be able to sufficiently replicate these protections². That is an official acknowledgement that some rights borrowers have today may not survive the transfer into the FCA rulebook in their current form.

What reform could mean for information you receive

Much of the Act is about what lenders must tell you: the pre-contract information, the agreement's form and contents, the statements and notices you receive while the loan runs. The FCA is already consulting on changes here. CP26/15, published in April 2026, proposes changes to simplify the financial promotions rules in CONC 3 and opens a discussion on ways to improve how cost of credit information is presented to consumers²².

The FCA has also tested the current documents with real borrowers. Its consumer research, conducted between 16 and 25 September 2025, involved ten 90-minute qualitative focus groups, eight online and two face-to-face, with 54 participants in total²⁰. The findings explain why the government thinks the Act's information rules need rewriting:

• Participants admitted to rarely reading the pre-contract credit information (PCCI) or using it to make comparisons between products and lenders²⁰.
• Notices of Sums in Arrears (NOSIA) and Default Notices were understood but often perceived as stressful and intimidating, potentially leading to consumer disengagement²⁰.
• The FCA information sheets accompanying these notices were viewed positively for their supportive tone and helpful guidance²⁰.

The direction of travel, then, is toward fewer prescribed documents and more emphasis on information people actually read. Some of this already exists outside the Act: under the FCA's banking conduct rules, where a firm proposes a change to a term, charge or interest rate that will be to the disadvantage of a banking customer, the firm should provide reasonable notice on paper or in another durable medium before the change takes effect²³.

Section 75 protection: £100 to £30,000 per purchase

Section 75 is one of the Act's protections. If the item costs between £100 and £30,000, and you paid on credit, you may be able to get your money back from the lender even if you only paid part of the amount on your credit card⁵. Welsh trading standards guidance puts it the same way: if you paid for what turned out to be bogus goods or services by credit card, and the cost was more than £100 and less than £30,000, you are protected by the Consumer Credit Act 1974⁶.

The protection is wide in scope. Section 75 applies even if the debtor, in entering into the transaction, exceeded the credit limit or otherwise contravened any term of the agreement²⁴. But it is limited by payment method: Section 75 does not include cases where the goods or services were bought with a debit card, charge card or prepaid card²⁵.

Two related rules extend the idea. Section 75A lets a debtor who has a claim against the supplier for breach of contract pursue that claim against the creditor where certain conditions are met⁷. And Welsh consumer guidance describes a further band: if the cost exceeds £30,000 and is less than £60,260, and the finance was arranged specifically to buy the goods, service or digital content, a claim may still be possible against the connected lender⁸.

Buy now pay later agreements now carry this protection too. The FCA states that Section 75 is available on Deferred Payment Credit, so you may be able to get a refund from the lender if something goes wrong with what you have bought, the same protection you would have using a credit card¹². A fuller comparison is on the buy now pay later versus credit card protection page.

Cooling-off, cancellation and early repayment rights

Cancellation rights come from more than one law, and the periods differ. For most distance and off-premises contracts, such as agreements made online or by phone, the cancellation period is 14 days⁸. The Act's own cancellation rules for cancellable agreements run to the end of the fifth day following the day on which the debtor received a copy of the agreement under section 63(2) or a notice under section 64(1)(b)²⁶. The difference between withdrawing from an agreement before it starts and cancelling it afterwards is explained on the withdrawal and cancellation rights page.

Early repayment is a separate right, and it is one the reform is unlikely to remove. Under section 94 of the Act, the debtor is entitled at any time, by notice to the creditor and payment of all amounts payable less any rebate allowable under section 95, to discharge the indebtedness⁹. The Consumer Credit (Early Settlement) Regulations 2004 entitle the debtor under a regulated consumer credit agreement to a rebate where all or part of the amount payable to the creditor is paid before the date on which it is due²⁷. Those regulations replaced the 1983 rebate regulations, which were revoked subject to savings for older agreements²⁸.

The 2010 regulations added the partial repayment right. The consumer has the right to repay an agreement early in part and to receive a reduction in the total cost of the credit as a result, in addition to the existing right to repay early in full¹⁰. The disclosure regulations require statements to tell you that the debtor has the right to repay the credit early at any time in full or partially²⁹, and the agreements regulations require the fact of that right to be set out in the agreement itself³⁰.

Default notices, statements and court action

If you breach a regulated agreement, the Act forces the lender to stop and warn you before it can act. Service of a default notice is necessary before the creditor or owner can terminate the agreement, demand earlier payment, recover possession of goods or land, treat rights as terminated, restricted or deferred, or enforce any security¹⁵. This is the rule behind the idea of an "unenforceable" agreement: if the lender skips the required steps, the courts can refuse to let it enforce the debt.

The notice itself is tightly specified. It must contain a statement that the notice is a default notice served under section 87(1) of the Consumer Credit Act 1974, the information set out in paragraphs 1 to 3, 6 and 8 of Schedule 2, and statements in the form specified in paragraphs 4, 5, 7 and 9 to 13 of that Schedule³¹. The wording was amended during the coronavirus pandemic by the Consumer Credit (Enforcement, Default and Termination Notices) (Coronavirus) (Amendment) Regulations 2020, which renumbered paragraphs and substituted notice wording in the schedules³².

Buy now pay later agreements are treated differently here. As noted above, sections 76, 86B, 86E and 87 will not apply to regulated deferred payment credit agreements¹⁸, so the default notice regime that applies to a personal loan does not apply in the same way to a buy now pay later purchase. What happens if you miss a buy now pay later payment is covered on the missed buy now pay later payments page.

Where the reform stands and what has not been decided

The reform is a work in progress, and the honest answer on many questions is that nobody has decided yet. The government has said the process will take a number of years³. The FCA has said it could not sufficiently replicate some of the Act's significant protections². The second stage consultation promised after the 2023 response has not yet produced final rules, and the FCA's April 2026 consultation on financial promotions is still a consultation, not final policy²².

What is decided is the current state of the law. The Act is up to date with all changes known to be in force on or before 28 September 2026⁴, and the legislation carries notes of changes that may be brought into force at a future date⁴. Sections 51A and 51B, inserted by the 2010 Act, and other prospective provisions show that the statute itself continues to evolve alongside the reform programme.

The open questions that matter most to borrowers are: whether Section 75 survives in its current form, given the FCA's warning about protections it cannot replicate²; what happens to the unenforceability rules, which depend on the Act's detailed formal requirements; and how the information duties are rewritten, given the research showing borrowers rarely read the current documents²⁰.

Complaining if your lender breaks the rules

While the Act is in force, its rules are backed by the Financial Ombudsman Service. Credit broking shows how this works in practice. Under section 155 of the Act, customers are entitled to a refund of all but £5 of a credit broking fee if they have not taken out a loan found by the broker within six months, and the broker is allowed to keep £5 of any fee if the customer has not taken out a loan¹¹. Common complaints the Ombudsman deals with include being charged a fee for finding a loan, sometimes without a loan ever being offered, fees not being refunded when no loan was taken out, and being misled or not correctly informed about the loan's terms or cost¹¹.

Other routes depend on what has gone wrong:

• Your credit file: under section 158 of the Act, you can make a written request, with identifying particulars and the fee, and the agency must give you a copy of the file it keeps about you within the prescribed period; if it keeps no file, it must tell you so, though it need not return any money paid³³. Credit reference agencies will not remove adverse information if it is correct, but you may ask to submit a "notice of correction" to explain the circumstances³⁴.
• Card misuse: under section 83, the debtor under a regulated consumer credit agreement is not liable to the creditor for any loss arising from use of the credit facility by another person not acting as the debtor's agent³⁵.
• A claim against a supplier: under section 75A, a debtor with a claim against the supplier for breach of contract may pursue that claim against the creditor where the conditions are met⁷.

The route to take, and when the Ombudsman rather than a court is the right forum, is set out on the Financial Ombudsman or court page. If a firm has failed rather than merely misbehaved, the question becomes one of compensation schemes, covered on FSCS or Financial Ombudsman. For the wider picture of who supervises lenders, see who regulates what.