HM Treasury Pitches Base Camp At The Mountain Of Consumer Credit Reform

HM Treasury has published its Policy Statement on reform of the Consumer Credit Act 1974 (CCA), setting out the planned policy direction following the Phase 1 consultation which closed in July 2025. The statement confirms the intention to repeal many provisions of the CCA, recasting these within the FCA Handbook (though not necessarily as a direct copy-out). The statement runs to over 140 pages which is notably large for a government policy statement, but this reflects the complexity of the task at hand. Nearly half of the document is taken up by a table that sets out which CCA provisions will be repealed or retained/retained and amended.

The change will see the UK's £200bn+ consumer credit market move away from prescriptive statutory requirements and towards a flexible, outcomes-based framework underpinned by the Consumer Duty and the FSMA regulatory architecture. The Financial Services and Markets Bill, which has commenced its journey in the House of Lords, will serve as the vehicle for this change.

The context of CCA reform

The transfer of consumer credit regulation to the FCA in 2014 as part of wider post-crisis regulatory reconfiguration saw over 80 provisions of the CCA repealed and 167 retained. This left a regime governed by a mix of FCA rules and the CCA and its associated secondary legislation, a situation which has largely remained static for more than a decade. 

An earlier consultation on principles to underpin reform of the CCA was conducted 2022 under the previous government; this was followed by the Phase 1 consultation in May 2025 which covered the overall approach to reforming the CCA.

The policy statement – key changes

The following key changes will be progressed:

• Information requirements: HM Treasury plans to repeal all CCA disclosure provisions and have them recast in FCA rules following a full FCA review, i.e. not as a like-for-like exercise. The FCA is expected to take the opportunity to modernise and simplify consumer-facing documentation. The FCA’s recent efforts to refine how disclosures work in the retail investment market may inform work in this space. While it cannot be a direct read-across, we might expect to see the regulator take a similar approach to developing regulation and communicating expectations to firms.
• Sanctions and enforceability: HM Treasury confirms the removal of the automatic sanctions regime under which even minor documentation errors can render agreements unenforceable. It considers this to be disproportionate and incompatible with a principles-based approach; the FCA's supervisory and enforcement toolkit will instead provide the deterrent framework. 
• Criminal offences: HM Treasury invited views on whether CCA criminal offences in relation to canvassing off trade premises, circulars to minors, credit reference agencies, pawnbroking and the debtor or hirer providing information about goods should be repealed in favour of reliance on FSMA-based regulatory powers. It had noted the dearth of convictions as one rationale for repeal. However, feedback to its consultation supported retention, so the criminal offences will remain.
• Transitional provisions: Information regarding transition to the new regime are set out in Chapter 5 of the Policy Statement. Importantly, there is recognition of the scale and complexity of the change to be accomplished. An enabling power will be included in legislation which will allow for it to make secondary legislation on transitional provisions.

Significant areas where no change is proposed at this time include:

• Sections 75 and 75A: There are no plans at this time to introduce changes to the provisions on creditor liability for breaches by suppliers. 
• Sections 140A-C: There are also no plans to make changes at this stage to the unfair relationships provisions in section 140A-C.

While HM Government may bring forward proposals in relation to these in future, it considers that the complexity of these provisions and wide-reaching implications of any changes mean it is important for further policy work, data analysis and stakeholder engagement to be carried out before doing so.

The FCA response

The FCA has welcomed HM Treasury's Policy Statement and confirmed that it intends to consult in due course. The FCA’s approach will be underpinned by the Consumer Duty; as part of its policy development, the FCA will consider existing consumer rights and protections, including cancellation and withdrawal rights, and termination of agreements including early settlement.

Timeline

A Phase 2 consultation from HM Treasury had been anticipated for early 2026, but given the feedback received to Phase 1, HM Treasury has decided it has enough evidence to proceed with changes without further consultation. These provisions are set out in the aforementioned annex.

The FCA is expected to set out its timeline and approach in due course.

Full implementation is expected to take several years and will depend on the passage of primary legislation, and FCA rulemaking. 

As with any programme of reform of this scale, there is also the risk of other policy priorities or unexpected changes in the operating environment leading to delay.

What should firms do?

Firms which are less familiar with the FCA regulatory regime should take steps to increase their awareness as far as practicable.

While no immediate action is required for compliance, firms should monitor for further FCA communications on the consumer credit rulemaking process and should use the Annex to the Policy Statement to map where current CCA compliance obligations are likely to be affected by the transition to FCA rules.

Firms should also monitor progress of the Financial Services and Markets Bill through Parliament as this primary legislation is likely to be amended as it moves towards enactment. A potential risk with the primary legislation is whether the current cost of living crisis will influence Parliamentarians to seek amendments which may be ‘of the moment’ rather than with the longer-term practicalities in mind.

Similarly, as the FCA commences consultation, firms should engage to ensure that the resulting regime is workable and appropriate.

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