Consumer Credit Act to be overhauled

The government said it wants to modernise consumer credit laws to cut costs for businesses, and to simplify rules for consumers.

The Consumer Credit Act came into effect in 1974, and regulates all credit card purchases and personal loans – to the tune of billions each year.

The government said the act is “highly prescriptive and increasingly cumbersome and inflexible” as it confuses customers and adds “unnecessary costst to businesses when implementing its requirements”.

Much of the act will move from statute to fitting under the responsibilities of the Financial Conduct Authority (FCA). The regulator will be able to quickly respond to emerging developments in the consumer credit market, rather than necessitate the amendment of existing legislation.

The government has committed to simplifying “ambiguous technical terms” to make it more straightforward to comprehend the protections they have.

John Glen, economic secretary to the Treasury, said: “The Consumer Credit Act has been in place for almost 50 years - and it needs to be reformed to keep pace with the modern world.

“We want to create a regulatory regime that fosters innovation but also maintains high levels of consumer protection.”

The government said the reform would take place over an “extended timeframe” due to the complexity of the regulation.

The news comes as the FCA has written to firms reminding them of their responsibilities to vulnerable customers during a cost-of-living crisis.