The government has committed to a sweeping overhaul of the Consumer Credit Act today in a bid to modernise the framework for credit firms and shift more power into the hands of the regulator.
The Consumer Credit Act, which came into force in 1974 and governs billions of credit card purchases and loans each year, has long been criticised by credit providers as outdated and overly prescriptive.
Ministers are now looking to overhaul the act and shift much of it within the remit of the Financial Conduct Authority, which government said would enable the regulator to “quickly respond” to developments in the consumer credit market, rather than having to amend existing legislation.
In a statement today, city minister John Glen said the reforms would allow regulation to adapt with innovation in the space.
“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,” he said.
“We want to create a regulatory regime that fosters innovation but also maintains high levels of consumer protection.”
Ministers said the reforms will allow lenders to offer a “wider range of finance” whilst maintaining high levels of consumer protection, allowing firms to more easily provide credit for emerging and new technologies like electric cars.
Any reforms will build on the recommendations of the landmark Woolard review of the unsecured consumer credit sector last year, which has paved the way for regulation of the buy-now pay-later sector, expected to be introduced later this year.
A consultation over how to reform the Consumer Credit Act is now expected to be published by the end of 2022, inviting views on the proposed reforms from across the credit industry.