Asset Finance: HM Treasury consults on reform of Consumer Credit Act

On 9 December 2022 HM Treasury published a consultation paper on reform of the Consumer Credit Act 1974 (“CCA”).

The Government announced its intention to reform the CCA in June 2022, with the ambition of moving most of the CCA from statute to FCA rules. Given the scale and complexity of this work, it is expected to take a number of years. The consultation paper is the first step in this process. In it, HM Treasury seeks views on the objectives, principles and overall direction of the proposed reform.

HM Treasury considers that it is the right time to further align consumer credit regulation with the wider financial services framework. However, in doing so, it recognises there are specificities of consumer credit regulation that potentially warrant a different approach to ensure adequate consumer protection.

The Government’s overall objective is to modernise and streamline regulation for the benefit of consumers and business. In practice, this aims to create a simpler, more focused regulatory regime for consumer credit and to modernise consumer credit regulation so it follows more closely the approaches in other areas of financial services regulation. It does not envision provisions being purely replicated in FCA rules, but being recast (potentially not mirroring their current composition). This means that rules, guidance and principles in the FCA Handbook will provide effective and high levels of consumer protections that achieve similar ends to existing legislation. HM Treasury recognises that there may be some provisions that will stay in legislation, subject to any modifications or refinements considered appropriate.

In chapter 4, HM Treasury has categorised the CCA provisions to understand specific issues and sets out its proposed approach to reform. Chapter 5 sets out further questions about how this reform can help increase access to credit and financial inclusion. It also explores how the consumer credit market can become fairer and take account of inequality.

Comments can be made on the consultation paper until 17 March 2023. HM Treasury intends to develop more detailed policy proposals, which it expects to put to stakeholders through a second stage consultation. Implementation of the final approach will likely require primary legislation, which will be brought forward when parliamentary time allows.

The FCA will consult on its approach to any new rules in due course.

Contact Bermans Asset Finance team