Consumer Credit Reform: What housing associations need to know

The government's long-promised overhaul of UK consumer credit regulation has commenced.  It wants to modernise this now overly complex regime that is not suited for the current digital and financial landscape.  They intend to replace the Consumer Credit Act 1974 (CCA), wherever possible, with a more agile, proportionate, outcomes-focused framework under the supervision of the Financial Conduct Authority (FCA).  Organisations who undertake regulated consumer credit activities in the course of their business will be impacted by forthcoming changes to the relevant statutory requirements in respect of those activities. 

The reform is being implemented in two phases.  The Phase 1 consultation, open from 19 May to 21 July 2025, sets out the government’s overall vision and priorities for reform.  It then goes on to focus on information, sanctions and offences. 

Information

The government proposes to repeal all CCA information requirements, which govern the content and timing of certain communications to consumers and have been accused of being rigid and prescriptive, contributing to poor consumer outcomes.  The FCA will recast in its rules a replacement regime that prioritises good outcomes for consumers over strict compliance, to align with the Consumer Duty.

The proposals specifically include:

• Removing all CCA provisions dealing with pre-contract, post contract, arrears and default information to customers, which are deemed to be legalistic, duplicative and difficult to understand. The FCA will subsequently consult on appropriate and proportionate replacement rules that maintain consumer protection.
• Repealing sections that treat contract modifications as entirely new agreements, triggering unnecessary disclosure obligations. This will make it easier to make small amendments to credit agreements.
• Eliminating the requirement that firms send documents to a consumer’s last known address, even if they’ve moved.
• Abolishing the small agreements exemption (agreements under £50) to align with adjacent reforms to “Buy Now Pay Later” products.
• Scrapping explicit consent requirement for electronic communications, paving the way for more streamlined digital interactions.

In due course, the way consumer credit firms prepare and send communication to their customers under credit agreements is likely to change.  While promise of a simpler and more agile system is welcome, much will depend on the replacement rules that the FCA puts in place and how they are enforced. 

Sanctions and Criminal Offences 

The government also proposes to remove the CCA’s sanctions and criminal offences, which it describes as deliberately punitive and, it notes, have been rarely used. Instead, enforcement would rely on the FCA’s existing powers, including fines and redress mechanisms, which the government sees as more effective and proportionate.

Looking Ahead: Phase 2 

Phase 2 of the reform, anticipated during Q1 of 2026, is likely to be yet more significant as the government seeks to address core issues.  The government has signalled its intention to:

• Review the legislative scope of regulation.  They have already highlighted particular areas of focus: types of credit agreement; consumer hire; business lending to sole traders and small partnerships; and ensuring that modern financial products are appropriately covered.  We are interested to see whether their policy work in this area allows review of other RP activities that have been (perhaps unwittingly) caught by the current regime, such as allowing tenants time to pay rent arrears and other instances of interest-free credit to tenants .
• Review key consumer rights and strengthen protections to reflect current technologies and market practices and with particular emphasis on fair treatment for vulnerable consumers.

There will also be consequential legislative change to ensure consistency across the broader financial regulatory framework.  The ultimate goal is to create a regulatory regime that is better suited to today’s financial landscape.

Industry Impact

While the changes are expected to benefit consumers and encourage innovation, the transition will be complex.  Firms will need to adapt internal processes to comply with the new regime, but we must await further FCA consultations before we can understand what that will look like.

Do get in touch with our financial regulation team if you need help or advice with consumer credit related issues.

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