Context
The FCA has published its response to the Treasury’s Policy Statement on Consumer Credit Act 1974 (CCA) reform, which was also published on 18th May. Reform of the CCA is an important step towards a more flexible regime that supports effective competition and innovation, while maintaining appropriate consumer protection both now and in the future.
The proposals set out a framework that places greater emphasis on FCA rules and guidance rather than prescriptive requirements set out in legislation. This is a theme in keeping with other recent Treasury publications which will impact the FCA (e.g., the Treasury’s AR regime proposals and SM&CR regime proposals).
Key points to note and next actions
The FCA intends to consult on the key elements of the consumer credit framework previously set out in legislation, where it has the powers to do so, considering the whole consumer credit process. Its approach will be underpinned by the Consumer Duty – which sets out expectations for firms to deliver good outcomes for consumers.
As part of its policy development, the FCA will consider existing consumer rights and protections, including for example, cancellation and withdrawal, and termination of agreements, including early settlement. Any proposals would be supported by evidence, including a cost benefit analysis and stakeholder feedback.
The FCA will continue to work closely with the Treasury, Government, Parliament, consumer bodies and other stakeholders as the reform programme develops, and it will communicate openly about its emerging approach and next steps in due course.
The Treasury’s announcement states that:
- Changes will mean consumers will receive clearer information when using credit cards, loans and overdrafts – helping them make smarter financial decisions.
- Reforms support innovation and growth, giving firms the freedom to develop new products while maintaining strong consumer protections.
The key Treasury Policy Statement reforms make transitional provisions for the transition from the current CCA provisions to the new reformed regime, and in summary are:
- To repeal most of the information disclosure requirements from the CCA, and to recast these into FCA rules (where appropriate and subject to any FCA consultation).
- To repeal the sanctions of unenforceability and disentitlement to interest from the CCA and for these provisions to fall away, relying on the FCA regulatory regime and the existing FCA supervisory and enforcement toolkit.
- To retain criminal offences. The options of repealing, retaining, or repealing all except specific offences (e.g., those that relate to minors and canvassing off trade premises) were considered.
The definition of ‘individuals’ for consumer credit purposes will be retained.