Industry trade body urges HM Treasury to prioritise modernisation of consumer credit regulations

After many years making the case for change, the Credit Services Association (CSA), the UK trade body for the debt collection and debt purchase industry, has cautiously welcomed the Government’s recent announcement of their intention to reform and modernise the now almost fifty-year-old Consumer Credit Act. In a new report published today, the trade body draws attention to the mismatch between the requirements of the existing legislation and the needs of modern society and business, calling on new Treasury Ministers to prioritise reforms.

Commenting on the report, Chris Leslie, Chief Executive of the CSA, welcomed the Government’s announcement but cautioned that “we have been down this road of promises and expectations before. With the roll out of the Financial Conduct Authority’s ‘Consumer Duty’ imminent, it is more important than ever that this dated legislation is finally modernised. We would urge the future Treasury team to recognise the importance of aligning with this.’

The CSA’s report entitled ‘Modernising Consumer Protection: The Case for Reforming and Updating the Consumer Credit Act (CCA)’ recommends the Treasury set out a detailed consultation timetable so that changes are introduced before the end of 2023 to avoid undermining the Financial Conduct Authority’s (FCA’s) obligation to introduce a Consumer Duty.

The report also recommends reform of consumer credit communications and suggests that the review looks strategically at the genuine needs of modern consumers. Report author Henry Aitchison, Head of Policy at the CSA, said: “It is important that we move away from the current approach of treating all customers identically and simply grafting antiquated requirements blindly onto new iterations of regulation.

Aitchison continued: “It has been widely recognised for many years now that some post-contractual information requirements never provided the information or accuracy that consumers actually need, while at the same time managing to undermine businesses’ attempts to work with their customers. Slapping a bandage on already faulty requirements by suggesting yet more paperwork to explain failing regulations isn’t going to cut it, if we are serious about the Consumer Duty.”

The report also draws out the importance of policymakers recognising the environmental impacts of their demands. The current approach to regulation demands vast quantities of paper to be posted to borrowers, and often even when circumstances such as the exercise of forbearance makes the mandated information factually inaccurate. The report suggests that some of the existing statutory notices could easily result in producing a carbon footprint of at least 1.3 million kg, consume 1680 trees and using 420 thousand kWh of energy – just to provide inaccurate but compulsory information!

Chris Leslie added: “The Credit Services Association urges new Treasury Ministers to pick up the baton of their predecessors and set out a timetable now to fulfil the legislative reform commitment. Comprehensible and joined-up consumer regulation demands nothing less.”