This month, as part of the Financial Services and Markets Bill, the Treasury published its policy statement on Phase 2 reform of the Consumer Credit Act 1974 (CCA), setting out how it plans to modernise the UK consumer credit regime by moving most detailed requirements from legislation into the Financial Conduct Authority (FCA) Handbook, with the FCA Consumer Duty becoming the central standard for firms.
Consumers who take out loans, credit cards or overdrafts are expected to benefit from clearer information about costs and key terms, helping them better understand their options and make more informed financial decisions.
The reforms mark the first step in moving many of the Act’s detailed requirements into the FCA rulebook, allowing regulation to be updated more quickly as markets and technology evolve. The new approach will be informed by consumer testing and kept under review, with the aim of ensuring people receive clearer, better-timed information when using credit products such as loans, credit cards and overdrafts, supporting more confident financial decision-making.
The reforms will:
- Transfer most CCA provisions into FCA rules and guidance
- Replace prescriptive legal requirements with principles- and outcomes-based regulation
- Reduce reliance on strict statutory disclosure and documentation rules
- Shift enforcement away from technical breaches toward FCA supervisory judgement
- Embed the Consumer Duty as the key test for consumer credit firms (fair value, consumer understanding, avoidance of harm)
- Enable more flexible updating of credit rules without new primary legislation
The reforms also set out changes to enforcement approach, including:
- Reduced reliance on automatic sanctions for technical breaches (e.g. documentation errors)
- A more proportionate, regulator-led enforcement model
- Retention of some limited statutory and criminal provisions where necessary
- Greater FCA discretion in how rules are applied and supervised
The reform will be delivered in stages:
- Primary legislation will repeal and replace parts of the CCA framework
- The FCA will consult on detailed replacement rules across the consumer credit lifecycle
- A phased transition will move firms from CCA compliance to FCA rule-based supervision
The statement confirms a policy direction (not a consultation). Detailed implementation will follow through FCA consultations and secondary legislation. We will engage with our members and the FCA as these plan progress.
