UK: Reform of the Consumer Credit Act 1974 takes shape

The government will repeal many of the remaining statutory provisions and recast them into FCA rules to create a more flexible regime.

Why should I read this?

On 18 May 2026, HM Treasury published its policy statement on reform of the Consumer Credit Act 1974 (CCA).  The policy statement responds to the Phase 1 consultation (published May 2025) and sets out the government’s approach to the remaining CCA provisions not covered in that consultation.

The government will transpose the majority of the remaining CCA provisions into FCA rules, repealing them from primary legislation in the process.  Many will be recast into FCA rules.  Others will fall away.  Some will be retained in legislation.

This follows the approach used for other legacy EU assimilated law financial services legislation, namely transposition into the FCA Handbook then repeal from the statute book.  The benefit  is flexibility: FCA  rules can be updated far more quickly than  primary legislation for which lead times are long and parliamentary time is scarce.

The changes are set out in Schedule 1 of the Financial Services and Markets Bill (FSMB) announced in the King’s Speech on 13 May 2026.  The reforms affect all firms carrying on consumer credit or consumer hire activities.  They are relevant to lenders, brokers, debt advisers, hire providers, motor finance firms and their advisers.

What’s new in the policy statement?

Scope of reforms

The policy statement (PS) goes further than the initial Phase 1 consultation by including CCA provisions not previously in scope, including securities and sureties (Sections 105, 107-111), credit-token agreements and liability for misuse of credit tokens, and the prohibition on increasing interest on default (Section 93). For the first time, we have a comprehensive view of how the CCA will be reshaped.

FCA gets wider powers over securities

The consultation did not tackle the securities and sureties provisions. The PS confirms these will be recast into FCA rules and goes a step further. The government will extend the FCA’s powers under FSMA and the Regulated Activities Order (RAO) so the FCA can make rules covering all forms of security, not just guarantees and indemnities. That is a meaningful expansion of the FCA’s regulatory reach.

Good news: enforceability sanctions will go

The PS confirms the government will repeal all CCA sanctions for unenforceability and disentitlement to interest. For firms that have spent years managing enforceability risk, this is a significant shift.

No change (yet): the thorny ones stay put

Sections 56 (antecedent negotiations), 75 and 75A (connected lender liability) and 140A-C (unfair relationships) are not being touched. The government acknowledges these are complex, heavily litigated and need further policy work. This is a deferral, not a decision — they have said to expect proposals in due course, but we have already been waiting over 12 years!

Transition: FCA rules first, repeal second

A key concern during the consultation was timing. The PS addresses this head-on: CCA provisions will not be repealed until the replacement FCA rules are in place. The government will take a power in the Financial Services and Markets Bill to commence repeal by secondary legislation, giving both firms and the FCA time to prepare.

What else do I need to know about CCA reform?

The policy statement sorts CCA provisions into three categories:

The rationale for CCA reform

The government says the CCA is out of date.  It considers the existing FCA regime (including the Consumer Duty, the Financial Ombudsman Service (FOS) and the FCA’s enforcement toolkit) provides robust consumer protection without the need for automatic sanctions.  The reform brings consumer credit in line with the modern UK model of financial services regulation, in which parliament sets the perimeter and the FCA sets detailed conduct rules.

What should I do?

Firms involved in consumer credit and hire should consider taking the following steps:

• Map your CCA exposures

Identify which CCA provisions your firm relies on today.  Assess whether they will be repealed, retained or recast into FCA rules.  Annex A of the policy statement contains a full provision-by-provision table.

• Review sanctions risk

With enforceability sanctions being repealed, firms that currently face sanctions risk should assess how this changes their compliance position.

• Prepare for new FCA rules

The FCA will consult on new rules to replace the repealed provisions.  Firms should engage early with FCA consultations to shape the outcome.

• Assess impact on existing agreements

The government will introduce transitional provisions.  Firms should plan for how existing agreements will be treated.

• Monitor the complex provisions

The complex provisions discussed above are not changing.  Firms with significant Section 75 or unfair relationships exposure should track any future proposals.

Next steps

Alongside the FSMB, the FCA has published a separate statement setting out its approach to CCA reform in which it confirms that it will be consulting on the replacement rules.  However no timeline is provided. 

The government will also review the credit broking regime in the RAO and continue work on the complex CCA provisions.

How Eversheds Sutherland can help

Eversheds Sutherland advises lenders, brokers, motor finance providers, fintech firms and trade bodies on consumer credit regulation.  We help firms assess the impact of regulatory change, respond to FCA consultations and prepare for new requirements.  We can help you map your CCA exposures, plan for transition and engage with the FCA as it develops its new rules.