The Consumer Credit Act 1974 (CCA) has been the foundation of UK consumer credit regulation for over fifty years. Despite amendments — most significantly through the Consumer Credit Act 2006 and the transfer of regulatory responsibility to the FCA in 2014 — the core architecture of the CCA remains rooted in a paper-based, pre-digital era. HM Treasury has confirmed its intention to reform the CCA substantially, transferring many of its prescriptive requirements into the FCA Handbook and modernising the framework for contemporary lending markets. This article examines the reform proposals, their implications for lenders and the practical steps firms should take to prepare.
Why Is the CCA Being Reformed?
The CCA was enacted in 1974 to address the consumer credit market of that era — a market dominated by hire purchase, doorstep lending and catalogue credit, transacted through paper agreements and postal correspondence. While the Act has been amended over the decades, its fundamental structure reflects assumptions about how credit is marketed, originated, documented and serviced that no longer hold true in a market dominated by digital applications, algorithmic credit decisions, open banking data and fintech platforms.
Key problems with the current framework include:
Prescriptive form requirements. The CCA and its secondary legislation (particularly the Consumer Credit (Agreements) Regulations 2010) prescribe the exact form and content of credit agreements in granular detail — font sizes, layout requirements, mandatory paragraphs. These requirements were designed for paper agreements and create significant compliance friction for digital-first lenders offering app-based or online credit products.
Inflexible sanctions. Under the CCA, failure to comply with certain formal requirements renders a credit agreement 'improperly executed,' making it unenforceable without a court order. This binary enforceability framework does not distinguish between minor technical breaches (a font size marginally below the prescribed minimum) and substantive failures that actually harm consumers.
Legislative rigidity. Because the CCA's detailed requirements are embedded in primary legislation and secondary legislation, changes require Parliamentary time. The FCA cannot update consumer credit rules as nimbly as it can update rules in other sectors governed by FCA Handbook provisions. This has created a two-tier regulatory framework where consumer credit is regulated partly by statute and partly by FCA rules.
Poor fit for modern products. Products such as buy now pay later (BNPL), earned wage access, subscription lending and embedded finance do not fit neatly within the CCA's product categories, creating regulatory uncertainty and potential gaps.
What Is Changing?
HM Treasury's reform programme involves several key workstreams:
Transfer of protections to the FCA Handbook. The core consumer protections currently embedded in the CCA — including pre-contract disclosure, right of withdrawal, early settlement rights and connected lender liability (Section 75) — will be transferred into FCA rules. This gives the FCA the flexibility to update requirements without primary legislation, while maintaining the substance of consumer protection.
Modernised disclosure requirements. Pre-contract information requirements will be redesigned for digital delivery. The current prescriptive format requirements (based on paper documents) will be replaced with principles-based disclosure rules that are channel-neutral — capable of being implemented effectively on mobile apps, websites and digital platforms as well as paper.
Simplified early settlement framework. The current early settlement calculation under the Consumer Credit (Early Settlement) Regulations 2004 is complex and poorly understood by both consumers and firms. The reform aims to simplify the calculation methodology while preserving the consumer's right to settle early with a proportionate interest rebate.
Revised enforceability regime. The binary enforceability framework — where technical breaches render agreements unenforceable — will be replaced with a more proportionate regime that distinguishes between breaches that cause consumer harm and those that are purely technical.
Credit broker regulation. The regulation of credit brokers and intermediaries will be updated to reflect the modern distribution landscape, including online comparison platforms, embedded finance providers and digital introducers.
Connected lender liability. Section 75 of the CCA — which makes credit card issuers jointly liable for breaches of contract by suppliers — is one of the most valuable consumer protections in UK financial services. HM Treasury has confirmed that the substance of Section 75 protection will be preserved, although the mechanism may be modernised.
Timeline and Process
The reform is a multi-year programme:
- 2024–2025: HM Treasury consultation on detailed reform proposals, including which CCA provisions transfer to FCA rules and which are repealed or modified.
- 2025–2026: FCA consultation on replacement Handbook rules, drawing on HM Treasury's policy decisions.
- 2026–2028: Phased implementation, with transitional arrangements allowing firms to adapt systems, agreements and processes.
The FCA has indicated that it will take a proportionate approach to implementation timelines, recognising that lenders need adequate time to update credit agreement templates, systems, staff training and operational processes.
Impact on Lenders
Agreement templates. Every regulated credit agreement template will need to be reviewed and potentially redesigned to comply with the new FCA rules. For large lenders with multiple product lines, this is a significant operational project.
Systems and processes. Lending platforms, origination systems, servicing systems and settlement calculators will need to be updated to reflect the new requirements. Early settlement calculations, in particular, may require system changes.
Compliance monitoring. Compliance teams will need to transition their monitoring programmes from CCA-based checklists to FCA Handbook-based frameworks. The shift from prescriptive compliance (checking specific form requirements) to principles-based compliance (assessing whether disclosure is clear, fair and not misleading) requires a different compliance mindset.
Training. Staff across origination, servicing, collections and complaints functions will need training on the new framework. The CCA has been the foundation of consumer credit training for decades, and the transition to FCA rules represents a significant knowledge management challenge.
Legal risk reassessment. The revised enforceability regime changes the legal risk profile for lenders. Technical breaches that currently render agreements unenforceable may have less severe consequences under the new framework — but new risks may emerge from the principles-based approach.
What Firms Should Do Now
- Monitor HM Treasury and FCA consultations closely — respond to consultations where the proposals affect your business model or product range.
- Begin an impact assessment — identify which CCA requirements currently apply to your products and map them against the proposed reform areas.
- Audit your credit agreement templates — understand the current CCA requirements embedded in each template and assess the scale of change needed.
- Assess system readiness — particularly for early settlement calculations, disclosure delivery and agreement generation.
- Engage with industry bodies and trade associations that are participating in the consultation process.
- Build CCA reform into your compliance change management programme with appropriate resource and budget allocation.
Regulatory Context and Outlook
The CCA reform sits within a broader programme of UK financial services regulatory modernisation — including the Edinburgh Reforms, the Smarter Regulatory Framework and the repeal of retained EU law. The direction of travel is towards a more flexible, FCA-centric regulatory architecture that can adapt more quickly to market developments. For consumer credit firms, this transition presents both challenges (the operational burden of change) and opportunities (a framework better suited to digital lending models). Firms that engage proactively with the reform process will be better positioned to influence outcomes and implement changes efficiently.
Regulatory Counsel advises consumer credit firms on CCA reform preparedness, FCA Handbook compliance and regulatory change management. Contact us for a free initial consultation. See our consumer credit sector page for details.
Frequently Asked Questions
The reform is a phased programme expected to run from 2025 to 2028. Detailed proposals are under consultation, with FCA replacement rules expected from 2026 onwards.
No. HM Treasury has confirmed that the substance of Section 75 connected lender liability will be preserved, although the mechanism may be modernised.
Transitional arrangements are expected to grandfather existing agreements, but firms will need to update templates for new lending after the new rules come into force.
The CCA reform and the separate BNPL regulatory programme are related but distinct workstreams. The modernised CCA framework will provide the regulatory architecture under which BNPL will be regulated.