The Government has announced that it is committing to reform the Consumer Credit Act 1974 (“CCA”), which regulates lending, including credit cards and personal loans. This reform is part of a drive to modernise legislation in this area, cutting costs for businesses and simplify rules for consumers.
What is the driver for change?
Within its press release, the Government stated that the CCA is highly prescriptive, inflexible, and difficult to understand for consumers. Further, businesses are burdened with extra costs when implementing CCA requirements.
A consultation on reform is due to be published by the end of 2022, with the intention of modernising the legislative approach to consumer credit. John Glen, the Economic Secretary to the Treasury, stated: “The CCA 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.”
What will change?
The government intends to:
Move much of the CCA from statute to sit under the Financial Conduct Authority (“FCA”). This will better place the FCA to respond swiftly to developments in the market rather than persevering with the long process of amending existing legislation.
Simplify technical terms so that consumers will more easily understand the protections they have and are entitled to.
Ensure it is easier and less costly for businesses to comply.
The reforms are likely to enable lenders to provide a wider range of finance while ensuring high levels of consumer protection. This is intended to be achieved by ensuring the information a consumer receives throughout the consumer credit journey is easy to understand and accessible in both screen and print format. The press release also states that the reforms will ensure lenders are able to provide credit for emerging and new technologies more easily, enabling a wider range of consumers to embrace technological innovation.
The reforms will build on the recommendations of the FCA’s retained provisions report and the Woolard Review which both endorsed a reformed CCA regime.
Regulatory reform post-Brexit has offered the opportunity to repeal or replace current systems, making sure the consumers’ needs are better serviced. The intention being to create a regulatory regime that stimulates innovation but also offers high levels of consumer protection. This appears to align itself to the FCA’s Business Plan 2022/23, where the regulator stated that it will support UK growth and innovation that serves the UK society, while simultaneously ensuring that it remained focused on protecting consumers from harm.
It remains to be seen if the nettle will be grasped in relation to the many areas of the CCA where there is confusion such as s.18 (multiple agreements), s.82 (variation of agreements) and whether fairness and certainty can be brought, particularly in relation to penalties and ending non-compliance, for statements and notices of sums in arrears.
Article co-authored by Anna Burdzy