The changes are designed to help consumers make wiser financial decisions by giving them clearer information when using credit cards, loans and overdrafts, the U.K. Treasury said in the release.
“People need to be able to make informed choices when applying for and using credit,” Rachel Blake, economic secretary to the Treasury and city minister, said in the release. “The Consumer Credit Act was written for a different era. We are creating a flexible regime fit for the digital age.”
First passed in 1974, the act has been updated over the years, although many of its central tenets have not kept up with the rise of digital financial products and services, according to the release.
The Monday announcement is the first step in moving many of the act’s requirements out of the legislation and into the Financial Conduct Authority’s rulebook, making them easier to update, per the release. Regulations will be steered by consumer testing and kept under review as products and technology evolve.
“This should mean that people using credit cards, loans, overdrafts or other borrowing products will benefit from clearer and better-timed information to help them understand their options and manage their finances with confidence,” the release said.
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The changes are also designed to give companies a “more flexible framework” that lets them develop new products and use new technology to better serve their customers, according to the release.
“Rather than working around rules designed for a world before smartphones and digital banking, businesses will operate under a regime that can adapt as the financial sector continues to innovate,” the release said.
Meanwhile, in the United States, subprime consumers represent 17% of the adult population, or roughly 44 million people.
This group’s presence can be seen in the buy now, pay later (BNPL) and healthcare spaces. Subprime consumers use BNPL at higher rates than the population at large but focus this usage on specific providers.
Young subprime consumers also said they are delaying care, skipping prescriptions and borrowing from family or friends to manage healthcare costs. Tax refunds and one-time government payments perform a similar role. Subprime consumers tend to use these to manage bills, pay off debt or shore up household finances.
