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StepChange response to HM Treasury consultation on Reforming the Consumer Credit Act 1974

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HM Treasury consulted on reforms to the remaining provisions of the Consumer Credit Act. Broadly, the consultation asks for views on the government proposed approach to this reform, including principles and objectives, whether and how CCA provisions might be replicated in FCA rules and how the consumer credit market can become fairer and more inclusive.

StepChange broadly agrees with the principles set out to underpin the proposed reforms, such as proportionality and simplification, but believes those principles should be considered secondary to the objective of not adversely affecting consumer protection. Key points raised in StepChange’s response to the consultation include:

  • CCA reform offers an opportunity to address unhelpful, unclear and sometimes frightening language used in some CCA notices and consumer information requirements. However, the complexity of consumer credit product terms and conditions, and of some credit product features, is an area where a focus on simplification through better written terms and conditions and better ‘adequate explanations’ could benefit consumers.
  • StepChange strongly supports the FCA view that some parts of the CCA information provisions should remain in legislation as they cannot be replicated in FCA rules without a reduction in consumer protection. The FCA Retained Provisions report is also clear that ‘that moving the requirements to the Handbook should not be a ‘lift and shift’ exercise’. We agree with the FCA that this should be an opportunity to review these CCA provisions against consumer information needs and the ongoing need for consumer protection.
  • The transfer of CCA information provisions, where appropriate, to FCA rules should be a curated process that aligns with the Consumer Duty approach of understanding consumer needs and supporting good consumer outcomes.
  • While the Consumer Duty should be powerful in guiding the approach to moving appropriate CCA provisions into FCA regulations, we do not believe the Duty changes the conclusion that some provisions need to be retained fully or partially in legislation. The Consumer Duty is mainly operating at a firm level and market level and could interact with the consumer credit regulatory regime in powerful ways to improve consumer outcomes. However, it does not support the needs and outcomes of any particular consumer in the same way CCA rights and protections can.
  • We see merit in the government working with the FCA and other interested stakeholders to explore moving some parts of CCA provisions into FCA rules and keeping sanctions in legislation or extending FCA rule making powers to allow sanctions such as unenforceability and disentitlement to be possible for a breach of FCA rules. However, CCA provisions including liability protection [section 75], unfair credit relationships, and time orders create specific rights and protections that cannot be easily replicated in FCA rules without a significant reduction in consumer protection.