Reform of the Consumer Credit Act 1974: HMT’s Policy Statement - May 2026
Summary
HM Treasury (“HMT”) has published its policy statement on reform of the Consumer Credit Act 1974 (the “CCA”) which sets out the Government's response to the Phase 1 consultation on CCA reform that closed in July 2025.
In short, the policy statement confirms the Government’s plans to repeal and recast many of the existing CCA provisions into the FCA Handbook, and therefore shift to an outcomes-based approach to regulating consumer credit that is complementary to the Consumer Duty framework.
Whilst the policy statement is clear in “why” the reforms are needed and “how” the reforms will be implemented, it does not give clear details on what the outcomes-based rules will look like. Consumer credit firms will therefore need to monitor the proposals and engage with the relevant consultations published by the FCA as these rules are developed.
The “Why”
The overarching aim of the reforms is to modernise a regime that the Government considers outdated and not in keeping with developments in technology, market innovation, and consumer behaviour. The Government's stated objective is to support a strong and healthy consumer credit market that works well for consumers and firms.
The “How”
The reforms will be taken forward as part of the Enhancing Financial Services Bill announced in the King's Speech on 13 May 2026.
The Government has confirmed it will use a single piece of primary legislation to bring about the majority of the reforms which reflects the complex interdependencies within the CCA.
As noted above, the Government will look to adopt an approach consistent with FSMA, where HMT will set the perimeter of the consumer credit regime in legislation, while allowing the FCA to set conduct requirements in the FCA Handbook.
The Government is clear that its objective is not to simply replicate the CCA provisions that are repealed and recast in the FCA Handbook. Instead, it will be the role of the FCA to consider what the appropriate requirements should be having regard to the FCA’s statutory objective, its existing rules, and the Consumer Duty framework.
Key changes
1. Information Disclosure Requirements
The majority of the information disclosure requirements (which relate to the information provided across the full consumer journey, including Pre-Contract Credit Information, the credit agreement, statements, copies, arrear and default notices etc.) will be repealed and recast into the FCA Handbook (subject to further consultation where required).
The Government feels that the current prescriptive format of disclosures results in consumer confusion, and limits the ability of firms to innovate and tailor communications making the legislation incompatible with digital delivery channels.
The Government expects that a tailored, outcomes-based approach under the FCA Handbook, that provides more scope for communications to be drafted in a tailored, clearer manner will improve consumer understanding and protection (particularly for vulnerable consumers) whilst reducing compliance complexity for providers.
2. Repeal of Sanctions
The sanctions of unenforceability (without a court order and until the breach is remediated) and disentitlement to interest and default sums will be repealed where the information requirement to which they are linked is also repealed.
The Government’s view is that these sanctions operate in an "all or nothing" manner without any assessment of consumer harm and so are disproportionate given the FCA's supervisory and enforcement toolkit, the Financial Ombudsman Service, and the Consumer Duty framework.
3. Retention of Criminal Offences
The criminal offences in the CCA will be retained, including those relating to canvassing off trade premises, circulars to minors, credit reference agencies, pawnbroking, and the debtor or hirer providing information about goods.
The Government considers that these offences continue to serve as a strong deterrent against particularly harmful business practices.
4. Repeal and Recasting of Rights and Protections
The Government originally intended to publish a Phase 2 consultation in 2026 to consider the remaining provisions of the CCA that were not covered in Phase 1. However, following the responses to the Phase 1 consultation, the Government decided it had sufficient evidence to take forward changes to those provisions without further consultation. The table below sets out what is proposed in respect of those remaining provisions under the CCA:
| Rights to be repealed and either fall away completely, or be recast in the FCA Handbook | Provisions being retained in legislation (subject to necessary amendments) | Complex CCA provisions – no changes to be made without further policy work and stakeholder engagement |
| Withdrawal rights and cancellation rights (noting some parts will be retained). | Core framework and definitions: consumer credit agreements, meaning of credit, running-account credit, fixed-sum credit, restricted-use and unrestricted-use credit, debtor-creditor-supplier agreements, debtor-creditor agreements, and consumer hire agreements. | Antecedent negotiations. |
| Early settlement and rebate rights. | Linked transactions. | Connected lender liability (Sections 75 and 75A). |
| Termination rights, including voluntary termination (noting some parts will be retained). | Cancellation consequences provisions: recovery of money paid by debtor or hirer, return of goods, and goods given in part exchange. | Unfair relationships (Sections 140A–C). |
| Securities and sureties provisions (noting some parts will be retained). | Withdrawal from prospective agreement. | |
| Credit-token agreements, acceptance and liability for misuse of credit tokens. | Protected goods. | |
| Agreement to enter future agreement void. | Ineffective securities. | |
| Liability for misuse of credit facilities. | Death of debtor or hirer. | |
| Interest not to be increased on default. | Pawnbroking provisions. | |
| Statements by creditor or owner to be binding. | Negotiable instruments. | |
| Land mortgages. | ||
| Judicial control provisions (including Time Orders), Ancillary Credit Businesses (including credit reference agencies), and Enforcement and Supplemental provisions. |
Timeline for the reforms
The Government is keen to ensure there is a smooth transition to the new regime with minimal market disruption. This is expected to take several years to achieve, as the FCA will also need time to develop its policy and consult on the relevant Handbook rules. As such, the transitional period to be determined by HMT will reflect the significant scale of change needed by firms and consumer groups. During this transitional period, firms and consumer groups will be required to continue to apply the current CCA and FCA rules.
Practical Implications for firms
There are no immediate actions for compliance.
For firms operating in the consumer credit market, the reforms are welcome and are expected to deliver greater flexibility in how they communicate with consumers, the ability to utilise technology more freely in consumer journeys, and a reduction in prescriptive compliance obligations. In particular, the removal of sanctions should reduce the litigation risk and operational uncertainty associated with technical breaches of information requirements.
However, as with any shift to an outcomes-based regime, firms will need to demonstrate that their communications and processes deliver good consumer outcomes, rather than simply complying with a prescribed checklist. Whilst the shift from the current approach to an outcomes-based regime is likely to require material changes to a firm’s documentation, customer journey and policies and procedures, the scale of these projects will only become clear when the proposed rules begin to be published.
As HMT’s work progresses, and the FCA begins its own consultation process on the CCA, firms should engage with the FCA to ensure the regime is practical and appropriate.
