The government has announced the first steps in a long-awaited reform of the Consumer Credit Act, with rules set to move toward a more flexible regime overseen through the Financial Conduct Authority rulebook.
For many small businesses, this will not be a change to act on overnight. But it is worth watching closely if your firm lends to consumers, brokers finance, offers credit-linked products, works with fintech providers, or relies on customer finance to support sales.
What has changed?
The Consumer Credit Act was first passed in 1974. Ministers say many of its detailed requirements were written for a much older credit market, before smartphones, app-based banking and today’s range of digital borrowing products.
The government says the reform will move many of the Act’s prescriptive requirements out of primary legislation and into the FCA’s rulebook. The aim is to make consumer-credit rules easier to update as products, technology and customer behaviour change.
The announcement says consumers should receive clearer information about the costs and key terms of credit cards, loans, overdrafts and other borrowing products. It also says consumer protections will be maintained, with the FCA retaining enforcement powers including the ability to fine firms that break the rules.
Why this matters for SMEs
The most obvious audience is authorised lenders and firms directly involved in consumer credit. For them, the practical effect may eventually be updated FCA rules, revised customer communications and more room to design digital-first products without working around older legislative wording.
But the change may also matter to smaller firms outside mainstream lending. Retailers that offer finance at the point of sale, brokers, software providers, debt-advice partners, introducers and professional-service firms may all need to understand how credit information, disclosure and customer journeys are expected to develop.
For SMEs already dealing with tighter margins, credit reform also sits in a wider finance-admin picture. Recent changes around HMRC registration for tax advisers show how quickly compliance detail can become operational work for small firms and advisers. BritishSME covered that earlier this month in its piece on HMRC tax adviser registration.
What to check now
Small lenders and finance-facing firms should start by mapping where consumer-credit rules touch their business. That could include application forms, digital onboarding screens, affordability prompts, cancellation information, reminders, collections wording, complaint handling and records kept for audit purposes.
If you use a third-party finance provider, it may be worth asking how they plan to track the reform and whether any customer-facing material, staff scripts or website wording will need updating once the FCA’s detailed rules become clearer.
Firms should also avoid assuming that “more flexible” means “less regulated”. The direction of travel is clearer, better-timed information for consumers, with strong protections still in place. That means any product or process changes will need to be tested against customer understanding, not just technical compliance.
What happens next?
The government has published a policy statement and says the reforms form part of the Financial Services and Markets Bill introduced in the King’s Speech. The detailed impact for businesses will depend on the final legislation and subsequent FCA rulemaking.
For now, the sensible step for SMEs is preparation rather than panic: identify affected products and customer journeys, keep an eye on FCA consultations, and make sure someone in the business owns the regulatory watchlist.
Source: GOV.UK: Consumer Credit Act reformed to protect consumers and support modern finance.
