The government announced on 16th June plans to modernize consumer credit laws in order to reduce costs for businesses and simplify rules for consumers.
The Consumer Credit Act, which went into effect in 1974 and governs billions of credit card purchases and loans each year, is highly prescriptive and becoming increasingly cumbersome and inflexible, confusing consumers and adding unnecessary costs to businesses when implemented.
Much of the Act will be moved from statute to the Financial Conduct Authority, allowing the regulator to respond to emerging developments in the consumer credit market without having to amend existing legislation.
It will also make it easier and less expensive for businesses to comply with regulation by simplifying ambiguous technical terms and making it clear to consumers what protections they have.
John Glen, Economic Secretary to the Treasury, said:
“The Consumer Credit Act has been in place for almost 50 years – and it needs to be reformed to keep pace with the modern world.
“We want to create a regulatory regime that fosters innovation but also maintains high levels of consumer protection.
“That’s why I have committed to undertake this ambitious long-term reform – and it’s exactly what I’ll deliver.”
The government will examine which parts of EU retained legislation can be repealed or replaced to ensure regulation is better suited to the needs of the British people now that the UK has left the EU.
The reforms will enable lenders to offer a broader range of financial products while maintaining high levels of consumer protection.
For example, we will make certain that the information a consumer receives throughout the lending process is simple to understand and accessible on both the screen and in print.
We will also make it easier for lenders to provide credit for emerging and new technologies like electric cars, allowing millions of people to embrace technological innovation.
The reforms will build on the recommendations of the Financial Conduct Authority’s retained provisions report and the Woolard Review, both of which called for a new regulatory regime.
A consultation document outlining the government’s proposals and soliciting feedback from stakeholders on how the Act should be reformed is expected to be published by the end of this year.
Further information
- Link to Woolard Review
- Link to review of retained provisions of the Consumer Credit Act: Final report
- Reforming the Consumer Credit Act is complex and will require substantive work to deliver the reforms. We therefore expect this will take place over an extended timeframe to ensure these complex reforms are fit for purpose.