The Consumer Credit Act, which regulates credit card purchases and personal loans and dates back to the 1970s, is to be reformed to make it fit for modern life, the Government has announced.
The move will cut costs for businesses and simplify rules for consumers, according to the Treasury, removing technical jargon so that people understand more clearly what protections they have.
A consultation on the direction of reform is expected to be published by the end of the year.
The Act came into force in 1974 and governs billions of credit card purchases and loans each year.
But the Government said it is highly prescriptive and increasingly cumbersome and inflexible, confusing consumers and adding unnecessary costs to businesses when implementing its requirements.
Much of the Act will be moved from statute to sit under the Financial Conduct Authority (FCA), enabling the regulator to quickly respond to emerging developments in the consumer credit market, rather than having to amend the existing law.
The changes will require substantive work and the Government said it therefore expects there will be an extended timeframe to ensure reforms are fit for purpose.
Economic Secretary to the Treasury John Glen said: “The Consumer Credit Act has been in place for almost 50 years – and it needs to be reformed to keep pace with the modern world.
“We want to create a regulatory regime that fosters innovation but also maintains high levels of consumer protection.
“That’s why I have committed to undertake this ambitious long-term reform – and it’s exactly what I’ll deliver.”
The Government said it will examine which parts of EU retained legislation can be repealed or replaced to ensure regulation is better suited to the needs of people in Britain.
It also wants to ensure that the information people receive throughout the lending process is easy to understand and is both screen- and print-friendly.
The Government added that it wants to ensure lenders can more easily provide credit for emerging and new technologies, such as electric cars.
UK Finance chief executive David Postings said: “We applaud the Government’s announcement that it will reform the Consumer Credit Act.
“Replacing this outdated legislation with regulatory rules that are suited to the modern world is the best way to protect consumers while allowing lenders to innovate and compete.
“The Government says it expects to consult on reforms by the end of this year, which is a really positive step. We hope that the forthcoming Financial Services and Markets Bill will enable changes to be implemented as swiftly as possible.”