Consumer Credit act to be replaced by new FCA rules
The Consumer Credit Act is set to be axed, along with Section 75. The Act will be replaced by rules overseen by the FCA. The Treasury is considering what this replacement might look like, a process that could take years.
Hargreaves Lansdown head of personal finance Sarah Coles said ‘The Consumer Credit Act has ridden to the rescue for millions of people. Section 75 has pulled them out of a dark hole when goods or services haven’t been delivered and they’ve been able to turn to their credit card company to save the day. So, the fact that the government is planning to axe the Act is bound to be unsettling.
‘Those who responded to the consultation,’ she continued, ‘were keen to keep something along the lines of Section 75, but there were also calls for some changes. This could strengthen some rights but endangers others. On the plus side, people called for more clarity for transactions which aren’t directly between a credit card and a seller, when the debtor-creditor-supplier chain is broken. Currently, people may think they’re covered by Section 75 when they aren’t.’
MP Andrew Griffith, economic secretary to the Treasury, said ‘I am committed to creating a new framework for consumer credit regulation that will deliver for the next 50 years, one that will be native to the dynamism of our innovative consumer credit market, that delivers strong and clear protections, that allows consumers to make informed choices, and that allocates responsibility fairly between consumers and businesses.’
The Treasury has said that the consultation was the first stage in the reform process, and that, due to their scale and complexity, the reforms will take a number of years to deliver, requiring primary legislation, a detailed rule-making process by the FCA and appropriate transitional periods to allow the industry to prepare for and adapt to new rules.
As a next step, the government says it will be ‘undertaking policy development to produce more detailed proposals, with a view to publishing a second stage consultation in 2024 to seek comment from stakeholders.’