Government consults on CCA reform

The Government is consulting on how it will take forward reform of the CCA. It has decided to split the reform into 2 phases. The first phase covers information requirements, sanctions and criminal offences.

• on information requirements, the regime going forwards will be based in FCA rules, which the Government thinks will have many benefits, including alignment with the Consumer Duty and flexibility. As a result, the proposal is to repeal all the information provisions in the CCA and underlying regulations, and replace these with appropriate requirements in the FCA Rules. The FCA will not simply copy and paste;
• on small agreements, the Government has decided to repeal the current disapplication of some parts of the CCA to these agreements, and let the FCA decide whether and how its rule should apply to small agreements;
• on modifying agreements, the Government proposes to repeal the current requirement that effectively completely repapers all elements of agreements when a term is modified, on the basis that the protections consumers need to help them understand the changes are provided elsewhere, not least by the Consumer Duty;
• on multiple agreements, the Government proposes to repeal this provision, which was intended to prevent firms combining different categories of agreement in a way that gave consumers less protection. Following feedback that this makes agreements hard to design and hard for consumers to understand, the Government has decided the FCA should consider how to ensure consumers receive information clearly;
• on electronic disclosure, again the CCA provision will be repealed in favour of the FCA being able to make more flexible rules so consumers can receive information in the way they want;
• on “gone away” consumers, the current law requires firms to continue to send documents to addresses even when they know the customer is no longer there – and this provision will be repealed so the FCA can consider what is the best way to deal with these cases;
• on sanctions for breach, the CCA regime currently prevents firms from enforcing agreements without a court order if customers have not been provided with compliant pre-contract information, the agreement does not contain all prescribed terms, or is improperly executed or where the consumer has not received their copy of the agreement or notice of cancellation rights. Also firms cannot enforce agreements until they have remedied certain breaches, such as errors in arrears or default sum notices. And for certain other breaches such as non-compliant notices, consumers will not be liable to pay interest or default sums during the period of breach. There have been mixed views on how well these sanctions work and how necessary they are and the Government has decided that, on balance, there is no need to have a regime which is deliberately punitive and not commensurate with the consumer harm suffered. It also thinks the current regime is not consistent with the FCA approach to proportionate regulation. So, it wants to remove the regime so that the breaches covered by it would be dealt with in line with the general FCA approach;
• on criminal offences, the current regime includes 5 criminal offences which the FCA could not, under its current rule-making powers, replicate. The Government is undecided as to whether it would be best to keep the offences in the CCA, repeal the offences and allow the FCA to take enforcement action, or keep perhaps only a couple of the offences.

Phase 2 of the consultation, which will take place before any changes from phase 1 are announced, as several of the elements are interlinked, will focus on:

• rights and protections;
• scope and key definitions; and
• consequential changes to other legislation.

Across both consultations, the Government will consider the cross-cutting areas of:

• Islamic Finance;
• Green Finance;
• Technology; and
• Public Sector Equality and Environmental Principles Policy Statement Duties

Consultation closes on 21 July.