People applying for and using credit to get clearer information

People who take out loans, credit cards or overdrafts are to be given clearer information about costs and what key terms mean.

The government believes many of the core rules in the Consumer Credit Act haven’t kept pace with the changing world since it was first passed in 1974.

And it says many of the current requirements are too detailed and prescriptive.

So ministers want to modernise the law so consumers apply for or using credit get the information they need when they need.

This, they say, will help people understand their options and manage their finances with confidence.

What’s changing?

As well as giving people clearer and more timely information, the government wants to make sure the system is more flexible, so rules can be updated as technology evolves.

These will be informed by consumer testing and kept under review as financial products and technology change.

In addition, ministers want to make sure the system better supports vulnerable people who may find jargon more challenging.

“People need to be able to make informed choices when applying for and using credit,” said economic secretary to the Treasury Rachel Blake.

“The Consumer Credit Act was written for a different era.

“We are creating a flexible regime fit for the digital age.”

Financial pressures forcing more people to rely on credit

It’s notable that the changes are being proposed at a time that more people are turning to credit to manage everyday costs.

Meanwhile, credit is increasingly built into everyday spending through apps, online checkouts and digital banking,

“For a lot of people, borrowing no longer feels like a major financial decision,” said Sebrina McCullough, director of external relations at Money Wellness.

“So making information easier to understand could help consumers make more informed choices and better understand the long-term cost of borrowing.

“This is especially important for vulnerable consumers or people already under financial pressure, who may struggle with complex terms or may not fully realise how quickly small amounts of borrowing can build up over time.”