The majority of the information disclosure requirements in the CCA and accompanying regulations will be repealed and replaced by FCA rules, aiming for more flexible, consumer-focused regulation.
We anticipate that the new information requirements will find their home in the FCA’s Consumer Credit sourcebook (CONC). It is very likely that the FCA will use this opportunity to make these requirements less formal and less prescriptive and model them around the new Deferred Payment Credit regime, underpinned by Consumer Duty outcomes. The direction of travel is already evident in the FCA’s recent consultation on consumer credit financial promotion rules in CONC 3, which aims to make these requirements less prescriptive and more closely aligned with the principles of the Consumer Duty. For example, the FCA is proposing to remove the guidance in CONC 3.3.10G(1)-(5) since the Consumer Duty already covers consumer understanding, remove CONC 3.5.12R on restricted phrases, as it’s now seen as too prescriptive and delete CONC 3.3.9G because rules on premium rate phone numbers are already covered by other regulations, making this guidance outdated.
As part of this consultation the FCA is also running a discussion on cost disclosure, including APR, exploring whether changes to CONC 3.5 could improve consumer understanding of credit costs. Specifically, the FCA is seeking stakeholder views on whether the current rules around APR disclosure and representative examples in credit advertising remain appropriate, or whether more flexible alternatives would better support consumer understanding.
Therefore it is very likely that the future information disclosure regime will focus on less prescription and more tailoring to consumer needs and understanding. FCA’s recently published PWC consumer research insight report shows that as part of the CCA reform it has been examining how credit consumers engage with information communicated to them across the consumer journey and consumer credit products. The report discusses important observations and insights into key elements on customer information needs. It found that consumers rarely engage with pre‑contract credit information (PCCI) or credit agreements, often because decisions are made earlier in the journey and the documents are perceived as overly long, legalistic and difficult to navigate. The report highlights that improvements to how information is presented, including simplified language, clearer formatting and upfront summary tables, could better support informed decision‑making, particularly for financially vulnerable and digitally‑averse consumers. Importantly, these findings are intended to support the transition to a more outcomes‑focused disclosure regime under FCA rules as part of the CCA reform.
What this means for firms
These changes will affect every lender’s documentation and onboarding journeys. The revocation of CCA information requirements and sanctions will require approximately 30,000 firms to amend their customer journeys and documentation, as existing materials will not align with consumer duty under the new requirements.
Reforms in relation to arrears, default notices & in-life information are likely to create major operational impact for collections and arrears handling. Given the high litigation risks attached to these requirements firms should carefully consider these changes and monitor how these requirements will be re-designed in FCA rules.
Also, firms should note that section 176A is being retained in the CCA, albeit with a minor amendment. Given the Government’s intention to modernise the CCA regime where flexibility is being created for digital delivery of information, we are unclear of the relevance of this provision and the reasoning for its retention in the CCA. Further clarity from HMT would be helpful to understand the context of this.
Sanctions attached to the relevant information requirements above will also fall away. For example, unenforceability without a court order and disentitlement to interest will be removed, as they are seen as disproportionate and outdated. The FCA and the Financial Ombudsman Service (FOS) regimes are considered sufficient for consumer protection.
What this means for firms
It is welcome news that the Government has decided to remove these sanctions, which are considered as disproportionate and outdated, align them with the broader financial services regime and focus remediation on actual consumer harm rather than technical breaches. However, this does not take away the possibility of private claims under Section 138D of the Financial Services and Markets Act 2000 (FSMA) for breach of CONC rules. Firms must also remain vigilant about FCA enforcement actions, reputational risks, and the need for proactive remediation and redress where harm is caused.
Notably the HMT’s final policy does not provide clear guidance on transitional provisions, particularly regarding customer rights in relation to these sanctions under agreements entered into before the new rules commence. Firms should monitor any future clarification from the Government on these transitional arrangements seeking to address the current uncertainties surrounding agreements made prior to the implementation of the new rules.
Many of the CCA provisions which cover rights and protections will be repealed. The Government considers the current requirements in the CCA are complex and in need of modernisation and that robust protection could be achieved through FCA rules as the FCA is responsible for setting conduct requirements.
Certain provisions (e.g., rights of withdrawal, cancellation, termination, early settlement, securities and sureties, interest on default, credit tokens) will be repealed and recast into FCA rules, except where legislative retention is necessary (e.g., linked transactions).
What this means for firms
High complaints and redress risks stem from the relevant consumer rights and protections and firms should take note of the relocation of these requirements into FCA rules. The requirements relating to early settlement and rebates often create operational complexity and heightened risk of errors and disputes. Firms must monitor how these requirements will be re-designed in FCA rules.
The relevant termination rights attach to agreements that are widely used in the motor and asset finance sectors, and these firms should carefully consider these changes.
