HM Treasury’s Consultation: Reforming the Consumer Credit Act 1974 - Which? response

Overarching comments:

• Which? welcomes HM Treasury’s consultation on reform of the Consumer Credit Act 1974 (CCA). As part of this consultation, HM Treasury states its intention to see how much of the CCA can be moved from statutory provisions to Financial Conduct Authority (FCA) rules to allow regulation to be more agile and responsive to changes in the market.
• While we understand the need for this review and the aims that the HM Treasury has set out, we have major concerns that moving key parts of the CCA to FCA rules would undermine consumer protections. We urge HM Treasury to ensure that consumer protections are maintained and strengthened to reflect issues and gaps in protections that have emerged. For example, Section 75 provisions should be updated to plug the gaps in protection that can apply to the treatment of purchases made by secondary cardholders authorised by the primary cardholder and third party payments to intermediaries/payment processing firms.
• In particular, the provisions under the CCA categorised as consumer rights and protections in the FCA’s Retained Provisions Report (RPR) , such as section 75, must remain in legislation to protect consumers. In the RPR, the FCA was clear that rights and protections could not be replicated in FCA rules without impacting or causing detriment. We agree with this position. Further, we are concerned that any case law associated with the rights and protections under the CCA will potentially be lost if these provisions are moved over to FCA rules.
• The sanctions regime within the CCA, including the presumptive unenforceability of agreements, is crucial to the enforcement of consumer rights and protections and should remain in legislation. Whilst other consumer focussed protections exist outside the CCA, they do not replicate the enforcement and sanctions regime in the CCA. We therefore support the FCA’s conclusion in the RPR that the sanctions regime provisions should remain in legislation given they cannot be replicated in FCA rules. 
• There could be some benefits to moving information requirements from CCA provisions to FCA rules, as greater innovation could potentially help to drive better consumer understanding and consumer outcomes. However, information requirements relate directly to the CCA’s unenforceability protections, and so cannot be fully transferred to FCA’s rules without undermining this. Core information requirements will therefore need to remain in legislation.
• We welcome the FCA’s implementation of the Consumer Duty as an opportunity to clarify what is generally expected of financial services firms. However, the Consumer Duty is a complement to and not a substitute for the need to outline clear requirements for firms enshrined in legislation or outlined in distinct FCA rules. As the Consumer Duty is not yet in force, it is not possible to anticipate the impact it will have. Any attempt to address aspects of the required CCA reform with the Consumer Duty alone are premature.