On 9th of December the Edinburgh Reforms, which includes around 30 reforms to existing financial regulation, was published. As part of these reforms HM Treasury published its first consultation on the Consumer Credit Act. The proposals aim to simplify the regime to encourage innovation in the credit sector. The proposals will also look to cut costs for consumers and businesses, while also increasing equality and fairness in the credit market by improving accessibility.
The Consumer Credit Act (“CCA”) came into force in 1974. The legislation governs consumer credit products such as credit cards, personal loans and motor vehicle finance agreements. A review by Christopher Woolard into the unsecured credit market in 2021 (known as the Woolard Report) recommended a shift to an outcomes-focused, holistic approach to regulating consumer credit.
HM Treasury confirmed its intention is to remove many of the current requirements from statute and replace them with “recast” FCA rules. Precise details of the changes to expect to the CCA requirements are not outlined in the Treasury’s consultation paper. However, the outlines some core principles that the reforms will be built around;
- The reforms will be proportionate.
- The reforms will align with other areas of UK financial services regulation.
- The reforms will align with the Consumer Duty requirements.
- The reforms will be ‘will be forward-looking’.
The consultation noted that these changes overall objectives are to “modernise and streamline regulation to the benefit of consumers and business. In practice, this will mean creating a simpler, more focused regulatory regime for consumer credit and modernising consumer credit regulation so that it follows more closely the approaches in other areas of financial services regulation.”
HM Treasury is seeking responses to a number of potential changes. These include whether respondents would support possible amendment of the Financial Conduct Authority’s rule-making powers under Financial Services and Markets Act 2000 (“FSMA”) in relation to consumer credit and consumer hire; and whether exemptions for “small agreements” should continue to exist.
The consultation will close on 17 March 2023.