The Consumer Credit Act 1974 (CCA) is a significant piece of legislation that regulates credit agreements, such as personal loans, overdrafts, and credit card purchases. However, the CCA has undergone numerous changes over the years, resulting in a fragmented and complex consumer credit framework that is difficult to navigate.

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Proposed reforms

In June 2022, the UK government announced its intention to reform the CCA, with the primary objective of moving the regime from legislation to FCA rules, ensuring a more outcomes-based approach to consumer protection.

The principles underpinning the proposed CCA reform are

• Proportionate - ensure that levels of consumer protection are proportionate
• Aligned - framework aligns with the style and content of current financials services legislation
• Forward-looking - mindful that changes need to be adaptable
• Deliverable - designed to be deliverable within a certain timeframe
• Simplified - modernise and simplify ambiguous technical terms used in the CCA

The reforms aim to increase accessibility and facilitate innovation, ultimately supporting the growth of the UK economy.

Expected changes

1. The government's proposals are wide-ranging and ambitious, with the consultation seeking views on issues such as redefining the concept of "consumer credit" and eliminating criminal sanctions for non-compliance.
2. The consultation also addresses the need to overhaul information requirements, as the current regime is quite prescriptive and may lead to an overload of information for consumers.
3. Two key considerations that may impact the review of information requirements are ESG and consumer understanding. Going paperless and switching to digital communications can support ESG, and a principles-based approach can simplify information disclosures, enabling consumers to make informed decisions.

It will take several years to implement the proposed reforms, and it is still too early to know how they will be carried out. However, the news of reform is a positive step towards creating a fundamental shift in how consumer credit is regulated.

What it means for you

If you want more information on the new reforms and how it could affect your firm, reach out to MEMA for more information on how we can support you in preparing for the new changes.

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