Consumer credit

In May 2026 the government announced it would repeal much of the law governing consumer credit, the Consumer Credit Act 1974 (CCA), with some of the provisions to be recast in rules set by the Financial Conduct Authority (FCA). It has said the CCA is:

• Prescriptive, confusing and duplicative, in requiring credit providers to communicate with customers in technical language which they may not understand.
• Inflexible in that the requirements can be a barrier to companies providing innovative new services.
• Complex in that conduct requirements for credit providers are spread between the act and the Financial Conduct Authority (FCA) Handbook.

The government’s broad policy is that responsibility for setting specific rules for financial services should be handed to the regulator, the FCA as far as is practical.

Handing responsibility to the FCA may allow credit regulation to develop more quickly and flexibly to changes in the credit market. For example, one advantage of rules being set by the FCA rather than Parliament via legislation, is that the FCA’s capacity to amend rules is not limited by the time available in the parliamentary calendar. The government also says such a move may encourage more innovation in the credit market and reduce the regulatory burdens on lenders, to the ultimate benefit of borrowers.

However, there is the risk that repealing parts of the CCA could dilute consumer rights and protections. The FCA has said that some of the protections in the CCA which the government plans to repeal are significant and that it would not be able to sufficiently replicate these protections within the FCA’s own rules.

The importance of these rights and protections has recently been illustrated by the motor finance mis-selling scandal. In August 2025 the Supreme Court judged certain commissions paid to car dealers by lenders (and passed on to borrowers) could be unfair under the CCA. Partly as a result of this judgment, the FCA has announced a redress scheme for motor finance customers which it estimates will cost lenders £9.1 billion; £7.5 billion in redress and £1.6 billion to run the scheme.

Separately from reform of the CCA, in July 2025 Parliament approved plans to regulate unregulated buy-now-pay-later credit, which has fast become one of the most popular forms of credit in the UK (held by around 20% of adults in 2024). Rules regulating the sector are due to come into force in July 2026.

This briefing covers the use of consumer credit in the UK, the legal framework governing credit, and recent developments in the sector.