On 16 June 2022, the Government unveiled a series of plans to modernise the Consumer Credit Act (the Act). The proposed reform builds upon the Woolard Review and the recommendations of the Financial Conduct Authority (FCA), published in its 2019 report. You can read our comments on the Woolard Review here.
The government states the aim of the reform is to “cut costs for business and simplify rules for consumers”. The announcement comes as the Bank of England raises interest rates for a fifth consecutive time in an effort to tackle a soaring inflation rate.
The reforms to the Act will likely affect a broad range of market players, including lenders under consumer credit agreements, owners under consumer hire agreements, credit brokers, credit reference agencies and trade bodies.
In short, the plan is to move much of the Act away from statute, and place it under the FCA Handbook. The intention is that this will allow the regulator to be more agile in responding to emerging developments in the consumer credit market, rather than having to amend existing legislation; a slow and lengthy process.
The government states the changes will allow lenders to provide a wider range of finance whilst maintaining robust consumer protection. The aim being that lenders can more easily provide credit for new technologies, helping consumers to embrace technological change.
John Glen, economic secretary to the Treasury, said the Act required reforms in order to keep pace with the modern world. He added, “we want to create a regulatory regime that fosters innovation but also maintains high levels of consumer protection”. Given the context of rising living costs and the risk of financial difficulties ahead, it is likely that the reforms will be eagerly anticipated by many.
In terms of next steps, a consultation on the direction of the reform is expected to be published by the end of the year. However, the government has highlighted that the reforms will take place over an “extended timeframe” to account for the complexities of the Act and to ensure the changes are fit for purpose.
DLA Piper will continue to monitor developments in this space.
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