The Government has announced a major reform of the Consumer Credit Act, with this marking an effort to modernise the framework for credit firms. Ministers are looking to give more power to the Financial Conduct Authority (FCA) as part of the changes, which the Government said would enable the regulator to quickly respond to developments in the consumer credit market, rather than having to amend existing legislation.
The original Consumer Credit Act came into force in 1974 and governs billions of credit card purchases and loans each year, is highly prescriptive and increasingly cumbersome and inflexible – confusing consumers and adding unnecessary costs to businesses when implementing its requirements.
The reform will also simplify ambiguous technical terms to make clear to consumers what protections they have – and make it easier and more cost-effective for businesses to comply with regulation.
Economic Secretary to the Treasury, John Glen said “The Consumer Credit Act has been in place for almost 50 years – and it needs to be reformed to keep pace with the modern world. We want to create a regulatory regime that fosters innovation but also maintains high levels of consumer protection. That’s why I have committed to undertake this ambitious long-term reform – and it’s exactly what I’ll deliver.”
“Leaving the EU has provided additional opportunity for regulatory reform and the government will examine which parts of EU retained legislation can be repealed or replaced to ensure regulation is better suited to the needs of the British people. The reforms will allow lenders to provide a wider range of finance whilst maintaining high levels of consumer protection. For example, we will ensure that the information a consumer receives throughout the lending process is easy to understand and will be both screen and print-friendly. We will also ensure that lenders are able to more easily provide credit for emerging and new technologies such as electric cars, helping millions of people embrace technological innovation.”
The reforms will build on the recommendations of the Financial Conduct Authority’s retained provisions report and the Woolard Review – which both made recommendations for a reformed regime. A consultation is expected to be published by the end of this year outlining the government’s proposals and seeking views from stakeholders on how the Act should be reformed.
Responding to the government’s David Postings, Chief Executive of UK Finance, said “We applaud the government’s announcement that it will reform the Consumer Credit Act. Replacing this outdated legislation with regulatory rules that are suited to the modern world is the best way to protect consumers while allowing lenders to innovate and compete. The government says it expects to consult on reforms by the end of this year which is a really positive step. We hope that the forthcoming Financial Services and Markets Bill will enable changes to be implemented as swiftly as possible.”