HMT’s policy statement on Consumer Credit Act 1974 reform: Insights for a future-ready consumer credit regime

Most of the pre-contractual and post-contractual information disclosure requirements under the CCA will be repealed and made into FCA rules. As a result, the automatic unenforceability and disentitlement to interest and default sums sanctions will be removed as well. This will likely be welcomed by firms. It will create a regime which is more proportionate and aligned with other regulated activities.

‍

The criminal offences of canvassing off trade premises, circulars to minors, credit references agencies, pawnbroking, and the debtor/hirer providing information about goods will be retained. This is an interesting departure from the FCA’s view set out in the original Phase 1 consultation document, which in general was that the FSMA regulatory toolkit would be sufficient. It also means consumer credit is still set apart from a number of other FCA regulated activities in that it has its own criminal regime sitting alongside the FSMA regime.

HMT has proposed that some CCA provisions should be repealed (either entirely or partially) and recast into FCA rules, including: withdrawal rights, cancellation rights, early settlement and rebate rights, termination of agreements (including voluntary termination), sections applicable to credit cards and most of the provisions relating to securities and sureties (guarantees). The FCA’s powers will be extended to ensure they cover different types of security.

HMT has also proposed that certain provisions should be retained in legislation (subject to necessary amendments). This includes the definition provisions, which means firms will need to continue to categorise their agreements in line with the current CCA definitions (e.g. fixed-sum credit, restricted use, debtor-creditor-supplier etc.). Other sections, including provisions relating to the death of the debtor or hirer and protected goods, will also be retained (with any necessary amendments).

HMT is not currently intending to amend the sections concerning antecedent negotiations (s. 56), connected lender liability (ss. 75 and 75A), and unfair relationships (s.140A-C). Its rationale is that these provisions are too complex and far-reaching and so additional policy work and analysis is needed before changes can be proposed. Firms may therefore wish to continue to engage with HMT, the FCA and industry bodies as the direction of travel for these sections evolves.

HMT has confirmed there will be transitional provisions and a transitional period which will be made via secondary legislation.