Consumer Credit Act reforms

Four years after announcing plans to reform the Consumer Credit Act (CCA), HMT has confirmed changes that aim to give consumers clearer information when taking out credit. For firms, this means a shift from prescriptive statutory requirements to a more flexible, outcomes-focused framework set out in FCA rules and underpinned by the Consumer Duty.

The reforms introduce welcome changes to key customer disclosures and specific CCA sanctions. However, the government has deferred decisions on some of the more complex areas, including on lender liability and unfair relationships which have featured prominently in motor finance redress cases. Tangible change as a result of the agreed changes is unlikely to be felt until late 2027 at the earliest as the legislative and FCA rule making processes are completed.

It will be frustrating that further work is still required on problematic areas of the CCA for lenders. However, on balance this approach advances many impactful changes without adding more delay to an already lengthy process and gives the government more time to determine the most appropriate treatment of more complex provisions in the interests of consumers and firms.

The Consumer Credit Act was written for a different era – we are creating a flexible regime fit for the digital age.

Rachel Black

Economic Secretary to the Treasury and City Minister 2026 (1)

At a glance

Repealed provisions (recast in FCA rules or fall away):

Majority of information and disclosure-related requirements
Automatic sanction
Key rights (withdrawal, cancellation, and termination, early settlement and rebates).
Securities and sureties
Limits to interest rate on arrears/default
Binding creditor or owner statements

Retained provisions:

Criminal offences
Key definitions including consumer credit agreement, pawnbroking, and protected goods
Unfair relationships and lender liability – sections 56, 75 and 140, (pending further policy work)

Timing / transitional arrangements: to be confirmed

Overview of the proposals

Summary

Overall, the repeal of information requirements and specific CCA sanctions is likely to have the greatest impact on firms, giving firms greater flexibility in how they communicate key information to customers and aligning the consumer credit regime more closely to other financial services frameworks. HMT has also concluded that it has sufficient evidence to repeal several other CCA provisions without a further consultation.

Information requirements

HMT will repeal most CCA information requirements, including those relating to agreements, pre- and post-contract information, and arrears and default notices. These will be recast in FCA rules, but not on a like-for-like basis. Reflecting the outcomes-focused approach of the Consumer Duty, the FCA is expected to use the reforms to simplify and modernise customer communications and improve customer understanding.

The final shape of the consumer credit disclosure rules is still to be determined, but the FCA’s introduction of the Consumer Composite Investments (CCI) regime may indicate the direction of travel: moving away from prescribed templates and rigid formatting requirements towards greater flexibility.

What could this mean for firms?

Less prescription and greater flexibility to design key consumer credit communications
A stronger emphasis on avoiding legal jargon and information that genuinely supports consumers
Greater focus on engaging, customer-centric communications
A minimum level of required information categories, and some standardisation to support comparability

Sanctions

Specific CCA sanctions, under which even minor documentation errors could render an agreement unenforceable, will be repealed. These include:

Automatic unenforceability except by court order
Unenforceability until the breach is remedied
Loss of entitlement to interest and default sums

HMT considers these sanctions disproportionate and inconsistent with the FCA’s principles-based approach. Under the reforms, sanctions for consumer credit breaches will instead be addressed through the FCA’s existing supervisory and enforcement toolkit, bringing the regime closer to the wider financial services framework.

Other repealed provisions

HMT has concluded that it has sufficient evidence to repeal several other CCA provisions without a further consultation, including:

Key rights, including withdrawal, cancellation and termination, early settlement and rebates
Securities and sureties
Limits on interest charged on arrears or default
Binding creditor or owner statements

Key retained provisions

Criminal offences

Following mixed stakeholder feedback, HMT will not proceed with repealing criminal offences relating to activities such as canvassing off trade premises, sending circulars to minors and pawnbroking. This means consumer credit will continue to differ from other areas of financial services.

Complex provisions – liability and fairness

HMT will not at this time amend more complex provisions, including unfair relationships and lender liability under sections 56, 75 and 140. HMT cites their technical nature, established market practice and the body of case law as reasons for this approach, although further proposals may follow once additional policy work is complete.

Deferring reform of these provisions is likely to disappoint industry. In areas such as unfair relationships, court interpretation can be seen as subjective, and reliance on a legal framework sits uneasily alongside the FCA’s principles-based approach used elsewhere in consumer credit.

Timing and transitional arrangements

The required legislation was introduced on 19 May as part of the Financial Services and Markets Bill, and the FCA has confirmed that it intends to consult on the key elements of the consumer credit framework. To support a smooth transition, CCA provisions will only be repealed once the new FCA rules are in force.

The transitional arrangements have not yet been confirmed and will be set out in secondary legislation. Given similarities with the CCI reforms, the FCA could adopt similar transitional arrangements – with firms having been given 18 months to implement from the confirmation of final rules. However, given lender familiarity with the Consumer Duty, and exisiting outcomes-focussed frameworks, the FCA may determine that a shorter period is appropriate.

A further uncertainty is how existing agreements will be treated, particularly longer-term agreements and those entered into between finalisation of the rules and their commencement. The FCA could adopt several approaches, such as a hybrid model retaining some CCA rights while applying new FCA rules to others, an approach adopted for reforms to second charge mortgage back books, or the inclusion of specific transitional provisions within the rules. Whatever the approach, further clarity on how the Consumer Duty should apply to these cohorts, particularly in relation to consumer understanding and outcomes monitoring will be required.

Implications

For lenders, the greatest challenge will be the shift to a more subjective regime where they will be responsible for designing disclosures that are genuinely decision useful. Disclosures will need to be Consumer Duty compliant and properly embedded within existing Consumer Duty outcomes monitoring frameworks. Firms will have to use their judgement when it comes to the content, tone and format of the disclosure and undertake consumer testing.

In addition, there are likely to be operational challenges around the production of disclosures. Firms will experience a tension between customisation and tailoring across different products versus the ability to mass-produce the disclosures with minimal manual intervention.

Firms will also have to consider how they monitor legacy agreements while transitioning to the new model.

Actions for firms

Lenders should continue to monitor the legislation and FCA consultation, as HMT’s approach and the FCA’s expectations may still change. Although the final rules are not yet settled and no immediate compliance action is required, lenders can take practical steps now to prepare:

Stocktaking – identify in-scope disclosures across product lines, including the systems and processes they connect to.
Consumer Duty – identify the customer journey, outcomes monitoring and MI touchpoints within existing Consumer Duty frameworks that may be affected.
Operational readiness – assess the operational and governance requirements for managing disclosure changes, including key stakeholder and system mapping.

How can KPMG in the UK help

KPMG professionals have extensive experience helping firms understand and apply FCA regulatory requirements and can help with:

Outcomes testing framework and approach to customer outcomes: Supporting the development/ refinements to outcomes testing framework across the customer lifecycle.
Customer communications design, review and testing: Supporting the re-design and approval of new or updated customer communications and the testing of communications to assess customer understanding
Review of new processes and journeys: Perform a gap analysis and review the design of new processes and updates journeys against repealed/ retained provisions and FCA requirements
Outcomes Monitoring and Reporting: Support with the design and updating of Customer Outcomes monitoring and reporting to oversee the changes made as a result of repealed provisions, including identification of risks and controls
Training: Provide training to key colleagues and senior management on the proposed changes and the impact on particular customer journe