GK’s Joshua Owolabi assesses Chancellor Rachel Reeves’ and FCA Chief Executive Nikhil Rathi’s differing perspectives on consumer finance regulation and the potential impact on the sector

The Chancellor Rachel Reeves insists that the government’s main objective is to facilitate economic growth and believes that the UK’s regulatory bodies should support this objective. In January 2025, the Chancellor wrote to several regulators, including the Financial Conduct Authority (FCA), directing them to ‘tear down regulatory barriers’ that hold back economic growth. This view is likely to have a significant impact on the regulation of consumer finance during the rest of this parliament (expected to end in 2029).

Since the 2008 financial crisis, the FCA and its predecessor the Financial Services Authority, have generally preferred to strengthen consumer finance rules to prevent the harm to consumers that occurred following the crisis (e.g. consumers being forced into high-interest loans without fully understanding the long-term impact on their finances). The pressure placed on the FCA could result in a reversal of long-term regulatory trends in the consumer finance sector, reducing compliance requirements on businesses across the sector.

Across several consumer finance sub-sectors, such as mortgages, motor finance, and personal loans, the FCA has spent the last decade implementing stricter measures to prevent the mis-selling of products and services, and to protect consumers from taking on excessive debt. These efforts culminated in the implementation of the Consumer Duty in July 2023. The Duty is a regulatory framework requiring firms to prioritise consumers’ needs. Firms must proactively identify the specific needs of each of their customers and prevent risks that could result in financial harm. This involves providing customers with clear financial advice on products like hire purchase agreements, which are common in the motor finance industry, so that they can make informed choices. It also involves making it as easy as possible for customers to switch or cancel products without incurring unnecessary debt.

Rachel Reeves’ belief that financial services regulation should encourage innovation, competitiveness, and increased risk taking in lending and investment is at odds with recent FCA consumer protection measures. This has resulted in contrasting messages from Reeves and FCA Chief Executive Nikhil Rathi. While Rathi has said the FCA will support innovation and economic growth, he has voiced concerns that the push to prioritise growth will result in an increase in financial scandals. He has warned the government and parliamentarians that there may need to be an ‘enduring acceptance’ of these failures as regulations are relaxed. Rathi’s concern is not a surprise. Since his appointment as Chief Executive in 2020, he has consistently emphasised the importance of consumer protections and market stability. Under his leadership, the FCA has prioritised improving affordability checks so that firms are not just doing basic credit checks and consumers understand the true cost of products.

An area where major change is likely to occur, despite Rathi’s reluctance, is in the balance between regulation and access to credit. Reeves has argued that excessive regulation can make it harder for consumers to borrow money, slowing economic growth. As a result, the government announced in May 2026 that it would reform the Consumer Credit Act 1974 (CCA), which established standard procedures for credit and hire agreements and sets out consumers’ rights when dealing with businesses in those sectors. The government says that its reform of the CCA is focused on modernising consumer credit rules so that they better reflect the realities of today’s digital financial market. It has stated that its main objective is to improve the quality and clarity of information provided to consumers. The government argues that current disclosure requirements are outdated, overly complex, and often overwhelm borrowers with lengthy legal documents that are difficult to understand. The government has said that the CCA reforms will help consumers make better-informed financial decisions and reduce the risk of individuals taking on unsuitable or unaffordable credit.

The government is likely to say that the primary reason for reforming the CCA is its desire to protect consumers. However. the push for economic growth and deregulation in financial services is what is truly driving these reforms. In reality, the core goal of the reforms is to reduce the number of detailed regulatory requirements that are entrenched in legislation and to give the FCA more power to amend regulations quickly without the passing of new legislation. By giving the FCA greater responsibility for setting consumer credit rules, the government hopes to create a more agile regulatory system that can respond more quickly to innovations in financial products, such as fintech and embedded finance. This is likely to lower compliance costs for businesses in the consumer finance market and reduce the likelihood that they fall foul of rules relating to the way in which credit agreements are written or structured.

Ironically, the changes to the CCA, including the increased role of the FCA in modernising credit rules, will place greater power in the hands of Rathi to regulate consumer finance, despite the difference in views with the Chancellor. Rathi will now need to oversee the implementation of changes to the CCA, while also overseeing other consumer finance reforms that have already been announced. For example, the FCA has said that it will complete a review of the Consumer Duty before the end of 2026 to understand firms’ approaches to monitoring consumer outcomes and how well consumers understand risk. The FCA believes that some firms are struggling to provide clear evidence that they are improving outcomes for consumers or that their advice is specific to each individual customer’s needs. This means that there is a scenario where firms will have requirements relating to affordability checks reduced by the CCA reforms, only to see new requirements placed on them to collect data on consumer outcomes following the review of the Duty. The implementation of both these reforms is an unenviable task for Rathi, as he seeks to balance pressure from the Treasury to support economic growth with his own regulatory agenda. The FCA will need to engage with firms to ensure that they are fully aware of the expected changes to the regulatory framework and that firms are not confused by the mixed messaging from the Treasury and the regulator itself.