Stakeholders in the Consumer Credit Act (CCA) have less than two months to share their views with HM Treasury on the “strategic direction” that reform should take. 

The 1974 Act, which provides the regulatory framework for administering personal loans and consumer hire agreements, has long been seen as past its ‘use by date’ and in need of root-and-branch reform, according to a great many providers of finance (and credit) in the UK.  

The Finance and Leasing Association (FLA), whose rank-and-file has run a seven-year campaign to reform the Act, saw their efforts rewarded in June 2022 when the then government of Boris Johnston agreed to add CCA reform to its agenda for improving economic growth and productivity.   

Fast-forward six months and two PMs (and two Chancellors) later, and the government’s support for reform of the Act has not waivered and remains wedded to the idea of driving innovation in the credit sector and increasing accessibility of credit products while offering consumer protections. 

The consultation will also ask stakeholders questions about how sanctions should be levied on firms that do not adhere to regulatory standards, while other questions are concerned with how reform should improve financial inclusion.

“An Act to establish for the protection of consumers a new system, administered by the Director General of Fair Trading, 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 transactions, in place of the present enactments regulating moneylenders, pawnbrokers and hire-purchase traders and their transactions; and for related matters.”

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Consumer Credit Act (1974), Prelude

Stephen Haddrill, director general of the Finance & Leasing Association (FLA), said: “The Consumer Credit Act was written back in the 1970s, and subsequent updates have merely nibbled the edge of what needed to be changed.

“We, therefore, welcome [the] announcement as the first stage of what must be comprehensive reform. For too long, consumers and lenders have had to deal with archaic language, complicated processes and rigid structure.

“We need a modern regime that protects consumers, facilitates innovation and is futureproofed to grow and adapt with the industry.

“The Government recognise the important role that credit plays in the economy, so we look forward to working with them to improve the regulation that underpins billions of transactions each year in the UK.”

In an FLA document published in March 2022, Haddrill said: “The CAA’s tendency to complicate and delay that which should be simple and quick cannot be tolerated as a continuing feature of modern regulation. The legislation is barely up to the task of protecting customers during benign periods, but during a crisis such as the pandemic, it falls far from the mark of what is acceptable,” 

Haddrill has also previously suggested that reform should include much of the CCA’s legislative powers being moved to the City regulator, the Financial Conduct Authority (FCA).

The shift also comes as the FCA is poised to launch its Consumer Duty – a principle that requires firms to act to deliver good outcomes for retail customers – at a time when the cost-of-living crisis is likely to see a growing number of businesses and people turn to finance to fund large purchases.

The government invites input from stakeholders by 17 March 2023.

Reforming the CCA, Consultation