The Consumer Credit act, along with Section 75, is set to be axed.
The Act will be replaced by rules overseen by the Financial Conduct Authority (FCA). The Treasury is considering what its replacement might look like, in a process that could take years.
“The Consumer Credit Act has ridden to the rescue for millions of people,” said Sarah Coles, head of personal finance at Hargreaves Lansdown.
“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 the government is planning to axe the Act is bound to be unsettling,
“Those who responded to the consultation were keen to keep something along the lines of Section 75, but there were 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.”
In the results of a consultation into the future of credit regulation published by the Treasury, 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, delivers strong and clear protections, allows consumers to make informed choices and allocates responsibility fairly between consumers and businesses.”
The Treasury states that this consultation was the first stage in the reform process, and due to scale and complexity, the reforms will take number of years to deliver, requiring primary legislation, a detailed rulemaking process by the FCA, and appropriate transitional periods to allow the industry to prepare and adapt to new rules.
“As a next step, the government 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,” the consultation states.