The Consumer Credit Act 1974 (CCA) has been the foundation of UK consumer credit regulation for over fifty years. Despite amendments, most significantly through the Consumer Credit Act 2006 and the transfer of regulatory responsibility to the FCA in 2014, the core architecture of the CCA remains rooted in a paper-based, pre-digital era. HM Treasury confirmed the shape of reform in a policy statement on 18 May 2026: most of the CCA's prescriptive requirements will be repealed and recast as FCA rules, while core definitions, section 75 and the unfair relationships test stay in the Act for now. This article examines the reform proposals, their implications for lenders and the practical steps firms should take to prepare.
Why Is the CCA Being Reformed?
The CCA was enacted in 1974 to address the consumer credit market of that era: a market dominated by hire purchase, doorstep lending and catalogue credit, transacted through paper agreements and postal correspondence. While the Act has been amended over the decades, its fundamental structure reflects assumptions about how credit is marketed, originated, documented and serviced that no longer hold true in a market dominated by digital applications, algorithmic credit decisions, open banking data and fintech platforms.
Key problems with the current framework include:
Prescriptive form requirements. The CCA and its secondary legislation (particularly the Consumer Credit (Agreements) Regulations 2010) prescribe the exact form and content of credit agreements in granular detail: font sizes, layout requirements, mandatory paragraphs. These requirements were designed for paper agreements and create significant compliance friction for digital-first lenders offering app-based or online credit products.
Inflexible sanctions. Under the CCA, failure to comply with certain formal requirements renders a credit agreement 'improperly executed,' making it unenforceable without a court order. This binary enforceability framework does not distinguish between minor technical breaches (a font size marginally below the prescribed minimum) and substantive failures that actually harm consumers.
Legislative rigidity. Because the CCA's detailed requirements are embedded in primary legislation and secondary legislation, changes require Parliamentary time. The FCA cannot update consumer credit rules as nimbly as it can update rules in other sectors governed by FCA Handbook provisions. This has created a two-tier regulatory framework where consumer credit is regulated partly by statute and partly by FCA rules.
Poor fit for modern products. Products such as buy now pay later (BNPL), earned wage access, subscription lending and embedded finance do not fit neatly within the CCA's product categories, creating regulatory uncertainty and potential gaps.
What Is Changing?
HM Treasury's May 2026 policy statement sets out what is repealed, what is recast in FCA rules and what stays:
| Area | Outcome |
|---|---|
| Pre-contract information, statements, arrears and default notices | Repealed from the CCA and recast as FCA rules where needed |
| Withdrawal, early settlement, rebate and termination rights | Fall away or are recast in FCA rules; some elements kept |
| Automatic unenforceability and loss of interest for technical breaches | Repealed where the linked information requirement is repealed |
| Section 75 and 75A connected lender liability | Unchanged pending further policy work |
| Unfair relationships (sections 140A to 140C) | Unchanged pending further policy work |
| Core definitions, pawnbroking, land mortgages, judicial control, criminal offences | Kept in the Act |
Outcomes-based FCA rules. The FCA will set the detailed requirements, underpinned by the Consumer Duty, rather than copying the CCA. Disclosure should become channel-neutral, so it works in apps and online as well as on paper.
Proportionate sanctions. The government views the current all-or-nothing sanctions as disproportionate, given the protection already provided by the FCA, the Financial Ombudsman Service and the Consumer Duty.
Timeline and Process
| Date | Milestone |
|---|---|
| May 2025 | HM Treasury launches the Phase 1 consultation |
| July 2025 | Phase 1 consultation closes |
| 13 May 2026 | King's Speech announces the financial services bill that will carry the reforms |
| 18 May 2026 | HM Treasury policy statement and FCA response published; Phase 2 consultation dropped |
| To be confirmed | FCA consults on replacement rules |
| To be confirmed | Commencement, after the FCA's rules are made, with a transitional period |
Until commencement, firms must keep applying the current CCA and FCA rules. Separately, deferred payment credit (buy now pay later) came under FCA regulation on 15 July 2026, so BNPL lenders now need FCA consumer credit authorisation or a temporary permission.
Impact on Lenders
Agreement templates. Every regulated credit agreement template will need to be reviewed and potentially redesigned to comply with the new FCA rules. For large lenders with multiple product lines, this is a significant operational project.
Systems and processes. Lending platforms, origination systems, servicing systems and settlement calculators will need to be updated to reflect the new requirements. Early settlement calculations, in particular, may require system changes.
Compliance monitoring. Compliance teams will need to transition their monitoring programmes from CCA-based checklists to FCA Handbook-based frameworks. The shift from prescriptive compliance (checking specific form requirements) to principles-based compliance (assessing whether disclosure is clear, fair and not misleading) requires a different compliance mindset.
Training. Staff across origination, servicing, collections and complaints functions will need training on the new framework. The CCA has been the foundation of consumer credit training for decades, and the transition to FCA rules represents a significant knowledge management challenge.
Legal risk reassessment. The revised enforceability regime changes the legal risk profile for lenders. Technical breaches that currently render agreements unenforceable may have less severe consequences under the new framework, but new risks may emerge from the principles-based approach.
What Firms Should Do Now
- Monitor HM Treasury and FCA consultations closely: respond to consultations where the proposals affect your business model or product range.
- Begin an impact assessment: identify which CCA requirements currently apply to your products and map them against the proposed reform areas.
- Audit your credit agreement templates: understand the current CCA requirements embedded in each template and assess the scale of change needed.
- Assess system readiness, particularly for early settlement calculations, disclosure delivery and agreement generation.
- Engage with industry bodies and trade associations that are participating in the consultation process.
- Build CCA reform into your compliance change management programme with appropriate resource and budget allocation.
Regulatory Context and Outlook
The CCA reform sits within a broader programme of UK financial services regulatory modernisation, including the Edinburgh Reforms, the Smarter Regulatory Framework and the repeal of retained EU law. The direction of travel is towards a more flexible, FCA-centric regulatory architecture that can adapt more quickly to market developments. For consumer credit firms, this transition presents both challenges (the operational burden of change) and opportunities (a framework better suited to digital lending models). Firms that engage proactively with the reform process will be better positioned to influence outcomes and implement changes efficiently.
Regulatory Counsel advises consumer credit firms on CCA reform preparedness, FCA Handbook compliance and regulatory change management. Contact us for a written proposal. See our consumer credit sector page for details.
Frequently asked questions
No date is set. The reforms need primary legislation and FCA rules first, and HM Treasury will set a transitional period. Firms must keep applying the current CCA until commencement.
No. HM Treasury's May 2026 policy statement leaves sections 75 and 75A unchanged, pending further policy work and engagement with stakeholders.
HM Treasury will set transitional arrangements in the legislation. Firms should expect to update templates and customer journeys for new lending once the FCA rules take effect, and should wait for the draft rules before redesigning documents.
BNPL lending (deferred payment credit) has been regulated by the FCA since 15 July 2026 under its own rules, including affordability checks and the Consumer Duty. It will move to the reformed framework along with other credit when the CCA changes take effect.
A policy statement on 18 May 2026 confirming that most CCA information requirements and the linked unenforceability sanctions will be repealed and recast as FCA rules, while sections 75, 75A and 140A to 140C stay unchanged for now.
There are no immediate compliance changes. Lenders should map which CCA requirements their products rely on and plan for the FCA's consultation on replacement rules.
Definitive guides on this topic
The permanent reference pages this article relates to.