Consumer credit act reform – Phase 1 (May 2025 consultation summary)

Overview

HM Treasury has published its Phase 1 consultation on proposed reforms to the Consumer Credit Act 1974 (CCA). The paper sets out initial proposals to repeal and recast provisions relating to information requirements, statutory sanctions, and criminal offences. This forms part of a wider plan to move consumer credit regulation into a FSMA-style regime, with rules made and enforced by the FCA.

The government’s stated aims include simplifying the regime, reducing prescription, and improving consumer understanding. This consultation is our first insight into what a new regime will look like in practice and is likely to be welcomed as a positive step forward. Eliminating disproportionate and rigid sanctions will make it easier for firms to deal with unintentional breaches and will hopefully lead to better outcomes for customers and greater certainty for firms. Removal of these sanctions does not of course mean there are no consequences for breach, as the FCA has a powerful toolkit at its disposal and firms will remain subject to the Consumer Duty, and it is to be hoped that a more flexible approach will result in more proportionate consequences. However, several key questions remain — particularly around which protections will be retained in legislation and which will be moved into FCA rules.

Key proposals

• Information and post-contract servicing requirements:
   The government proposes repealing much of the CCA’s prescriptive disclosure and servicing regime (e.g. in relation to pre-contract disclosure, content of agreements and the requirement to send statements and notices of sums in arrears), to be replaced by FCA rules. The intention is to allow more flexibility, though some stakeholders have expressed concerns about a potential loss of consistency and comparability across firms. Linked to this, in what will be good news to lenders, the government is also proposing to repeal some outdated technical aspects of the CCA regime including provisions in relation to small agreements, modifying agreements, multiple agreements and electronic disclosure (including s176A).
• Sanctions:
   The government is consulting on removing statutory sanctions for non-compliance with information requirements — including unenforceability and disentitlement to interest, arguing that the FCA regime and FOS jurisdiction provides adequate protection and will ensure that liability for redress is “commensurate” with the level of customer harm. However, the consultation acknowledges concerns from consumer groups that the removal of automatic sanctions could reduce consumer protections, particularly where enforcement action is being taken.
• Criminal offences:
   The consultation sets out three possible options for reforming CCA-specific criminal offences (e.g. door-to-door canvassing, circulars to minors):
   (a) repeal all such offences,
   (b) retain them all, or
   (c) retain only those relating to minors and canvassing.
   The government has not expressed a preference and is seeking stakeholder views.

Approach to implementation

• Phased reform:
  • Phase 1: Information requirements, sanctions, and criminal offences.
  • Phase 2 (to follow): Rights and protections (e.g. section 75, unfair relationships), regulatory scope and definitions.
• Legislation and timing:
   Reform will require primary legislation. The government is considering using a single legislative vehicle for both phases, subject to parliamentary time.
• FCA rulemaking:
   The FCA will consult separately on the new rulebook provisions that would replace repealed CCA sections.

Next steps

• The consultation will remain open for nine weeks, closing on 21 July 2025.
• A Phase 2 consultation is expected in due course.
• Stakeholders may wish to begin assessing the potential operational impact of moving from a statutory to an FCA-led regime — particularly in areas like disclosure, enforcement, and consumer redress.

Buy-now pay-later regulation 

Overview

HM Treasury has published its response to the October 2024 BNPL consultation. The government confirms it will proceed with plans to regulate BNPL agreements offered by third-party lenders (to be known as Deferred Payment Credit or DPC agreements), while direct merchant-provided finance will remain outside scope, continuing to benefit from the exemption under Article 60F(2) RAO. The government notes that it will monitor developments, particularly around potential avoidance (e.g. Splitit-type reseller structures).

Key outcomes from the consultation

• Merchant finance out of scope:
   Merchant-provided instalment credit will remain exempt. However the draft statutory instrument also includes an anti-avoidance provision to ensure that an agreement under which the lender purchases and resells the goods will be regulated and not exempt. 
• Disapplication of CCA information and post-contract servicing requirements:
   CCA disclosure and servicing rules (e.g. in relation to pre-contract disclosure, content of agreements and the requirement to send statements and notices of sums in arrears) will be disapplied for DPC. The FCA will instead develop bespoke rules. This disapplication aligns with the direction of CCA Reform, where these provisions are proposed to be repealed entirely.
• No CCA unenforceability sanction:
   DPC will not be subject to CCA enforcement sanctions (unenforceability, disentitlement to interest, etc.). Instead, firms will be regulated via the FCA’s principles-based regime, including oversight under Consumer Duty, CONC (including arrears and forbearance rules), Breathing Space, and access to the FOS.
• Retention of Time Orders and s.86:
   Time Orders under section 129 CCA will remain available. Section 86 (court order required for enforcement after debtor’s death) will also apply to DPC agreements.
• Credit broking:
   Most merchants offering DPC will be excluded from FCA licensing as credit brokers. However, unauthorised merchants must have any financial promotions approved by an authorised firm. This will normally be the third party lender, provided they have financial promotion approval permissions.
• Domestic Premises Suppliers – under review:
   The government has not extended the broking exemption to domestic premises suppliers (e.g. in-home sales), but has acknowledged late-stage feedback and is actively considering whether to exclude these suppliers from licensing requirements. Legislation reflects the consultation position for now.
• Temporary Permissions Regime (TPR):
   A TPR will be established to allow BNPL firms to continue operations while seeking authorisation. This will be implemented via forthcoming legislation.
• Financial promotions (TPR firms):
   DPC firms in the TPR can approve their own financial promotions for onward communication by unauthorised merchants. However, they cannot approve a merchant’s own promotional content. This reflects a specific revision to the draft SI to correct misalignment with policy intent.
• SM&CR:
   Firms operating under the TPR will be exempt from both the Senior Managers and Certification Regimes.
• Interaction with PSRs:
   Where DPC arrangements qualify as payment services, providers must comply with the Payment Services Regulations 2017. The FCA may disapply duplicative information requirements using its rules. This issue is left to the FCA to address in detail during rulemaking.

Summary

The government has confirmed its intended approach with only minor changes to the previously consulted position. While the policy direction is clear, key details remain unaddressed, particularly around:

• how FCA information rules will be designed;
• treatment of domestic premises suppliers;
• how the TPR will work in practice (including application timing); and
• coordination with PSRs for dual-regulated BNPL/payment firms.

A separate consultation by the FCA on the detailed rules for BNPL regulation is expected later this year.

Authored by James Black, Aine Kelly, Jen Staniforth, Elizabeth Greaves, and Sofie Gowran.