People who take out loans, credit cards or overdrafts are expected to benefit from clearer information under Government plans to make rules “fit for the digital age”.
Rather than working around rules designed for a world before smartphones and digital banking, businesses will operate under a regime that can adapt as the financial sector innovates, the Government said.
The reforms, part of the Financial Services Bill introduced in the King’s Speech, will make information about costs and key terms clearer, supporting people who may find jargon more challenging.
The Government said that while some updates have been made over the years to the Consumer Credit Act, which was first passed in 1974, many core rules have not kept pace with the digital financial products and services that millions of people use every day.
Many of the Consumer Credit Act’s detailed requirements will be moved into the Financial Conduct Authority’s (FCA) rulebook – making it easier to update them as technology evolves.
The new regulations will be informed by consumer testing and kept under review as products and technology changes, the Government said.
Economic Secretary to the Treasury and City minister Rachel Blake said: “People need to be able to make informed choices when applying for and using credit.
“The Consumer Credit Act was written for a different era – we are creating a flexible regime fit for the digital age.”
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The Government said that consumer protections in the Consumer Credit Act will be maintained to the highest standards.
The FCA has a wide range of enforcement powers, including the ability to fine firms that break the rules.
Peter Tutton, director of policy, research and public affairs, StepChange Debt Charity, said: “Whilst the Consumer Credit Act contains important and much needed consumer protections, new steps to move communication requirements into FCA rules allow flexibility and a ‘test and learn’ approach that will offer better outcomes to consumers and reduce harm around debt.”
Chris Woolard, chairman of the Woolard Review and partner at EY, said: “Modernisation of the Consumer Credit Act to support better outcomes for both consumers and firms was a key recommendation of the Woolard Review of the unsecured credit market.
“These first steps, to enable clearer information and new products, are therefore welcome ones.”
Eric Leenders, managing director of personal finance, UK Finance said: “UK Finance welcomes the Government’s plans to modernise the Consumer Credit Act.
“Ambitious, forward-looking changes are needed to give consumers clearer, more accessible information, and lenders flexibility to provide new and innovative products.
“These reforms are an important step towards a simpler, future‑proofed regime with strong consumer protections in an increasingly digital world.”