Reform of the Consumer Credit Act: HMT Policy Statement

The Government has published a policy statement, and presented a Financial Services and Markets Bill to Parliament (“FSMB”), confirming its intention to repeal much of the CCA in favour of a regime which will largely sit under FCA rules and guidance and underpinned by the Consumer Duty.  Whilst prescriptive requirements relating to consumer facing documentation and related sanctions (impacting the unenforceability of agreements and disentitlement of interest and default sums) are set to be repealed, a handful of powerful consumer protections are retained for the time being including Section 56 (antecedent negotiations), Sections 75/75A (connected lender liability) and Sections 140A-C (unfair relationships). 

As noted in our May 2025 blog post here on the Government’s first consultation, Government planned a second consultation phase which was set to cover some of the more difficult terrain in the CCA before moving to a policy statement.  It has decided, however, that it has sufficient evidence to take forward ‘some changes’ now but not ‘more complex’ provisions. 

A three-pipe problem 

Perhaps unsurprisingly, the ‘complex’ provisions which the Government is not proposing to change at this time relate to:

• Section 56 (antecedent negotiations): the provision relating to pre-contractual dealings under which communications by brokers / suppliers are treated as being conducted by lenders and can form the basis of claims against the lender under the CCA; 

• Sections 75/75A (lender liability for supplier breaches): classically used in credit card claims but other finance contracts also; and  

• Sections 140A-C (unfair relationships): famously broadly drafted provisions as to when a court may determine a relationship to be unfair and affording a broad range of orders where it does. These provisions have most recently been in the headlines in the context of motor finance claims. 

The government ‘may’ bring forward proposals in relation to these in the future, but it considers that ‘the complexity of these provisions and wide-reaching implications of any changes mean it is important for further policy work, data analysis and stakeholder engagement’ to be carried out.

Items to be repealed 

The Government has confirmed that it is repealing:

• Information requirements: the majority of the information requirements (including agreements, statements and notices) in the CCA and accompanying regulations will be repealed and recast into the FCA Handbook, where appropriate (and subject to FCA consultation).  It is anticipated that FCA will not simply copy and paste requirements from legislation into its handbook.  Instead, its review and consultation will determine how best to deliver an information regime which maximises consumer understanding whilst supporting innovation; and 

• Sanctions: with recognition that the CCA approach to sanctions is outdated given the development of financial services regulation since 1974 and consumer access to the FOS since 2007, the following sanctions will be repealed:

  • unenforceability without a court order;

  • unenforceability until the breach is remedied; and

  • disentitlement to interest and default sums.

Instead, there will be reliance on the FCA regulatory regime (e.g. CONC and FCA principles and the consumer duty), and the existing FCA supervisory and enforcement toolkit.

Certain provisions relating to the following items (not covered in the Phase One consultation), will also be repealed and are expected to fall away where covered by other requirements or recast under FCA rules:

• rights of withdrawal and cancellation;

• termination rights (including in relation to open-ended agreements and voluntary termination rights in relation to hire-purchase agreements and conditional sale agreements); 

• early settlement and rebates;

• credit tokens and related liability for misuse – the concept is now outdated in light of digital payments and there is overlap with the PSRs; and

• other provision including those relating to: securities and sureties, limits to the rate of interest on arrears/default, agreement to enter future agreement being void and statements on creditor/owner to be binding.

Items to be retained

In addition to the ‘complex’ provisions mentioned above for which there will be no changes ‘at this time’, there are a number of provisions that will be retained (with any necessary consequential amendments). 

These include:

• many of the definitions including consumer credit agreements, credit, running-account and fixed-sum credit, restricted and unrestricted use credit, debtor-creditor-supplier agreements, debtor-creditor agreements and consumer hire, but not all (as noted above, for example, credit-token is going);

• provisions on linked transactions, withdrawal from a prospective agreement, negotiable instruments, time orders, protected goods, death of the debtor or hirer; and the provisions on credit reference agencies; and 

• the criminal offences in the CCA will also be retained. The consultation explored repealing some or all of these offences, with a range of options proposed. Having reviewed feedback, and noting a clear difference of view between consumer groups and industry, Government has decided to keep them. 

A full list of provisions and the Government’s related proposal is set out in Annex A of the policy statement.

A ‘clean break’? 

A key question to be answered is the approach to transition for existing agreements. For example, it is not clear whether an ‘improperly executed’ agreement concluded under the current regime (and attracting the automatic sanction of unenforceability without an order of the court) would continue to be treated as such once the new regime takes effect.  It is notable that in the context of 2016 transition of second charge mortgage loans from the CCA to FSMA (consumer credit back book mortgages) certain CCA rights and protections were retained through transitional provisions. Whilst this may sign-post the approach that could be taken here, the policy statement does not conclude on the point. It notes that Government plans to engage further with stakeholders and that transitional provisions will be handled under secondary legislation. 

Next steps

On 20 May, the Financial Services and Markets Bill was introduced into the House of Lords reflecting, amongst other changes to UK financial services regime, the consumer credit regime amendments. The legislative process if parliamentary time allows, should be completed before the end of the year with the legislation coming into force on a date to be specified in secondary regulation.

The final shape of the new regime will only be known once the FCA has consulted on and published any rules it intends to bring forward. In a response to the policy statement, the FCA confirmed its approach will be underpinned by the consumer duty, and the FCA will consider existing consumer rights and protections when developing its policy.  Timing is unclear at this stage, with the FCA committing to provide more information on its approach and next steps in due course. 

You can read more about the Financial Services and Markets Bill in our Blog post here.