Proposed reforms to the Consumer Credit Act: key updates and considerations

In May 2025, His Majesty’s Treasury (HMT) made two consequential announcements regarding consumer credit regulation: proposed reform of the long-standing Consumer Credit Act (CCA) 1974 and introduction of the first ever regulation of Buy-Now, Pay-Later (BNPL) products. The goal of the CCA reform is to develop clear and proportionate regulations that protect consumers whilst striking a balance with the government’s growth objective. Below, we have outlined the immediate implications.

We have also taken a deeper look into how the CCA reforms intersect with novel BNPL regulations, in our article ‘Buy-Now, Pay-Later regulation: What should firms consider?’

What are the main updates?

Whilst acknowledging the CCA’s role in protecting borrowers, the government believes that this policy has not kept pace with the evolving lending market and the development of new regulatory frameworks. This includes significant shifts such as the Financial Conduct Authority (FCA) assuming responsibility for consumer credit from the Office of Fair Trading in 2014 and the introduction of the Consumer Duty, aimed at strengthening consumer protections. Consequently, in 2022, the government set out to reform the CCA. After consulting with key stakeholders, HMT has put forth proposals to render consumer protection laws less confusing, duplicative, inflexible, and disproportionate, among other improvements.  

The government is not aiming to overhaul consumer protection regulations. In fact, it intends to largely maintain the outcomes of the current regulations whilst alleviating their principal shortcomings, doing so in two phases: 

• Phase 1 - ‘outlines the government’s overall vision for a reformed regime and seeks views on the government’s proposed approach to information requirements, sanctions, and criminal offences’. 
• Phase 2 - ‘will set out how the government intends to reform the scope of regulation, definitions, rights and protections’ and will look at changes to other legislation, where needed.

Although the proposals for phase 1 are generally further along than for phase 2, the Consultation Paper (CP) still provides insight into the latter. For both, consultation will remain open until the 21st of July 2025.  

The proposed changes to the three elements of Phase 1 

1. Information requirements focus on pre- and post-contractual information in addition to arrears, default, and forbearance information. The government intends to repeal all related provisions in the CCA and accompanying regulations and for these to be recast (where deemed necessary) into FCA rules. 
2. Sanctions, which may be applied when a firm breaches certain information provisions, will, based on the current proposal, undergo the most significant changes. The government finds that the existing FCA regime and court process provide sufficiently robust consumer protection and, consequently, that sanctions (which ‘were designed to be deliberately punitive and not commensurate with the level of harm suffered by consumers’) are no longer necessary. 
3. Criminal offences include several offences related to lending, such as canvassing off trade premises and sending circulars to minors, punishable under the CCA. Unlike with the other two elements, HMT has not yet decided on a proposed approach to reform. According to the Consultation Paper, the government is still exploring ‘whether it is necessary to retain some or all of the criminal offences in the CCA, or whether they can all be repealed’. The current hesitation is rooted in uncertainty regarding whether the FCA regime alone provides a sufficiently strong deterrent to maintain robust consumer protection. 

The proposed changes in Phase 2 

Although the government is not yet ready to publish highly detailed proposals for phase 2 of the reform, it has provided stakeholders with strong indications of its likely path forward. Broadly speaking, this phase covers three main elements and discusses consequential changes to four ‘important cross-cutting themes’, which can both be found in chapter 7 of the Consultation Paper. For now, firms should know that, as part of phase 2, HMT aims to put forth regulation (either through legislation or identification within the FCA rulebook) closely replicating sections 75 and 140a of the CCA. Briefly put, section 75 permits consumers to claim refunds when paying with credit cards, whilst section 140a allows courts to determine whether a lender-consumer relationship is unfair. 

We will provide additional insight following HMT’s publication of more detailed phase 2 proposals. In any case, phase 1 of the reforms already advances consequential updates to the U.K. consumer credit landscape. Consequently, as the government seeks input on its proposals and intends to push reforms through Parliament as early as possible, firms should begin considering the potential impacts on their businesses.

What are the key considerations for firms

Organisations view the reform positively, as it alleviates the regulatory burden imposed by the CCA. However, like any transition, it presents both opportunities and risks. When managed effectively, change can enhance an organisation’s reputation and performance. Conversely, if mishandled, firms risk missing the chance to deliver an outstanding customer experience, develop innovative yet fairly priced products, and contribute to broader economic growth.

Below, we outline key considerations that firms should take into account when preparing for the changes proposed in this CP.

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