The government is committed to modernising the UK’s credit laws. Good reform must benefit both consumers and firms, while supporting the government’s wider growth agenda.

Effective legislation evolves to reflect the times, rather than standing still; the CCA is now outdated and no longer reflects the consumer protection needed in an increasingly digital world. This failure to adapt to changes in technology and consumer behaviour have left it in the past, in some instances even making life difficult for the customers it was designed to protect.

Earlier attempts at reforming the CCA have failed to implement sustainable improvements: UK Finance is optimistic that with the government, industry and other stakeholders committed to reform, this time should be different.

A two-step approach

The government has divided reform into two distinct phases. As part of this, it has set out some key themes to serve as guiding principles of the reformed regime, however, we would call for financial inclusion to be added as a core principle that underpins it.

Phase One outlined the vision for reform, with an emphasis on the transfer of responsibility for information requirements and supervision to the FCA, and the revoking of the outdated sanctions regime.

The Phase One consultation has now closed.

Phase Two is ongoing and expected before the year-end, reflecting the Government’s desire for speedy reform – which we fully support, recognising that firms will need time to implement the required changes and acclimatise to the new regime.

Credit and the CCA

The availability of credit is hugely important to the UK’s economy, being relied upon by millions of people. However, current regulatory and legislative requirements present a challenge to firms and often lead to more conservative approaches to credit being adopted by firms to ensure compliance.

The outdated nature of the CCA, with the stringent requirements that firms must adhere to, has been an important factor in limiting the ability of firms to innovate and expand their credit offerings, leading to challenges around access to credit provision for some in the UK.

Reforming the CCA will allow the UK’s credit market to enter the 21 century, with the transfer of responsibilities to the FCA being a golden opportunity for a holistic review of credit regulation, examining legislative and regulatory reform.

A win-win

Consumer protections must be sustained, but they need not be set in stone. As with legislation, their ability to evolve is critical.

As the UK’s credit market modernises, firms can innovate and tailor their product offerings and support to consumer needs, while providing the proportionate protections they rightly expect; a win-win.