Reforming the Consumer Credit Act: evolution, revolution – and what firms should do now

The Government’s proposed reforms to the Consumer Credit Act 1974 (CCA), to be delivered through the Financial Services and Markets Bill introduced on 19 May 2026¹, represent one of the most important reshaping exercises in UK consumer credit regulation for many years. HM Treasury’s policy statement²  and the Financial Conduct Authority’s (FCA) same-day response³  make clear that this is about more than tidying up an ageing statute. It is about moving consumer credit more decisively into the UK’s FSMA model: Parliament sets the perimeter, and the FCA sets the conduct rules.

That policy direction matters. The Government says the current regime is too complex, too prescriptive and poorly adapted to modern products, digital channels and changes in consumer behaviour. Its stated objective is a more agile, flexible and proportionate regime that supports innovation and growth while maintaining robust consumer protection.⁴  The FCA, for its part, has said its approach will be underpinned by the Consumer Duty.

The strategic shift: from prescribed form to customer understanding

The most significant change is the proposed repeal of the majority of the CCA’s information requirements, with those requirements to be recast into FCA rules where appropriate and following consultation. HM Treasury says this covers information provided across the consumer journey, including pre-contract disclosures, post-contract information and arrears, default and forbearance communications. It has also been explicit that the objective is not to replicate the current provisions word-for-word inside the Handbook.

For firms, that is a major shift in emphasis. The direction of travel is away from detailed statutory formality and towards communications that genuinely support customer understanding. That is entirely consistent with the Government’s public messaging that consumers should receive clearer information at the right time, and with the FCA’s statement that any replacement framework will be considered across the whole consumer credit process and underpinned by the Consumer Duty.

The opportunity here is obvious: greater flexibility, more scope to tailor communications, and a regime that can adapt more quickly as products and technology evolve. But there is a real compliance trade-off. A move away from prescriptive rules usually means more judgment, more evidential burden, and more scope for debate after the event about whether a firm has actually delivered a good outcome. For many firms, the practical challenge will not simply be redrafting notices. It will be rethinking customer journeys, governance, testing and MI so they can evidence that communications work in practice. That is not stated in the policy papers; it is the practical consequence firms should already be focusing on.

Sanctions: a significant reset in legal and remediation risk

HM Treasury has confirmed that the CCA sanctions of unenforceability without a court order, unenforceability until breach is remedied, and disentitlement to interest and default sums will be repealed and will fall away when the relevant information requirements are repealed. The Government’s reasoning is that these sanctions were designed for the old OFT regime, whereas the current FSMA/FCA framework already includes supervisory and enforcement powers, the Financial Ombudsman Service, CONC and the Consumer Duty. It views the sanctions as being disproportionate and incompatible with a more outcomes-based approach.

For firms, this is one of the most commercially significant aspects of the package. The removal of automatic statutory consequences for technical breaches should reduce some of the cliff-edge exposure that has historically characterised consumer credit compliance. But firms should not read this as softer regulation. It is better understood as a reallocation of regulatory risk: away from automatic statutory sanctions and towards FCA supervision, FOS complaints, redress analysis and an outcomes-based assessment of harm.

Criminal offences remain

Not everything is moving into the FCA Handbook. HM Treasury has decided to retain the criminal offences in the CCA, including offences relating to canvassing off trade premises, circulars to minors, credit reference agencies, pawnbroking, and certain information about goods provided by a debtor or hirer. The Government’s explanation is that these provisions still serve as a strong deterrent against harmful business practices.

That point is worth drawing out, because it shows the reform is not a straightforward deregulation exercise. The Government is prepared to move much of the conduct framework into FCA rules, but it is also retaining legislative tools where it considers they continue to serve a distinct protective or deterrent function.

What is staying in legislation?

The policy statement is also clearer than some initial commentary suggested on the extent of the retained statutory architecture. HM Treasury proposes to keep a range of core definitional and structural provisions in legislation, including provisions relating to consumer credit agreements and the meaning of credit, running account credit, fixed-sum credit, debtor-creditor-supplier and debtor-creditor agreements, consumer hire agreements, linked transactions, protected goods, pawnbroking, land mortgages, and much of the remaining machinery around ancillary credit business, enforcement and interpretation.

That matters because it means the future regime will still be hybrid. Although large parts of the customer-facing conduct framework may migrate into FCA rules, firms will still need to navigate a residual statutory code in important areas. In other words, the reform is substantial, but it is not a clean-sheet rewrite.

The “too difficult for now” category

HM Treasury has expressly stated it does not intend to change certain complex CCA provisions at this stage, including section 56 (antecedent negotiations), sections 75 and 75A (connected lender liability), and sections 140A to 140C (unfair relationships). The stated reason is their complexity, the fact that they are underpinned by a considerable body of case law, and the wide-reaching implications of reform, with further policy work, data analysis and stakeholder engagement needed before any future proposals are brought forward.

For firms, that is a very important signal. Some of the CCA provisions that generate the most legal attention and litigation risk are being left in place for now. So, while the reforms are far-reaching, some of the most familiar and commercially important legacy risks remain.

Additional technical points firms should not miss

There are also some less headline-grabbing, but still important, details in the policy statement. HM Treasury says it intends to repeal most provisions relating to securities and sureties and recast them into FCA rules where appropriate. Because the FCA’s current powers do not extend across the full range of “security” captured by the CCA, the Government proposes to extend the FCA’s powers in FSMA and the RAO for this purpose.

That is a notable point for legal and compliance teams because it underlines that the reform is not confined to disclosure architecture. It also anticipates changes to the legal framework that underpins how the FCA can regulate certain credit- and hire-related protections going forward.

No Phase 2 consultation, but plenty more consultation to come

The Government had originally intended to run a Phase 2 consultation on the remaining provisions. It has now said it has enough evidence to proceed in some areas without doing so. However, that does not mean the detail is settled. HM Treasury has repeatedly said that many provisions will only be recast into FCA rules where appropriate and subject to FCA consultation. The FCA has likewise said it intends to consult on the key elements previously set out in legislation and that it will continue to communicate its emerging approach and next steps.

So, the key consultation phase, from firms’ perspective, is shifting from HM Treasury policy design to FCA rule design. That will be where the real detail emerges on what good looks like in practice.

Timing and transition

The Financial Services and Markets Bill was introduced on 19 May 2026 and, as at the date of publication of this article, remains progressing through Parliament. HM Treasury has said it will take a power in legislation to commence the reforms so that firms have enough time to prepare once the FCA has designed its replacement rules.

That is important. The existing CCA requirements will not simply disappear overnight. The reforms will require primary legislation, FCA policy work and transitional planning. Firms therefore have a window, but they should use it.

Evolution or revolution?

The answer is both.

It is revolutionary in the sense that large parts of the existing statutory regime are being dismantled and replaced with FCA-led rules. But it is evolutionary in the sense that important rights, definitions and case-law-heavy provisions remain in place. That combination means the future regime is likely to feel more modern and more flexible, while still carrying legacy complexity in important areas.

The central message for firms is this: do not mistake reduced prescription for reduced regulatory expectation. The policy statement, the ministerial statement and the FCA’s response all point in the same direction. The future regime is intended to be more outcomes-focused, more adaptable and more firmly anchored in the Consumer Duty. In practice, that means the question is likely to become less “have we followed the form?” and more “can we show we delivered a good outcome?”

What firms should be doing now

For firms affected by consumer credit reform, the immediate priorities are likely to be:

• Mapping which of their current processes rely heavily on prescriptive CCA form and content requirements, because those are the areas most likely to need wholesale redesign if replaced by FCA rules

• Identifying where they will need stronger evidence of customer understanding and outcomes, particularly across digital journeys and vulnerable customer interactions

• Monitoring FCA consultation activity closely, because that is where the legal and operational detail will be settled

• Reassessing legal and remediation risk models in light of the removal of automatic sanctions and the continuing prominence of FCA supervision and FOS redress