What Is The CCA? The UK Consumer Credit Act Explained

If you sell to customers on finance or offer “buy now, pay later” style instalments, you’ve probably heard people mention “the CCA”. But what is the CCA, when does it apply, and what does it mean for your small business in practice?

In the UK, “CCA” normally refers to the Consumer Credit Act 1974. It’s a core piece of legislation that still underpins how consumer lending works today. While the Financial Conduct Authority (FCA) now regulates the sector, the CCA sets many of the rules for what your agreements must contain, how you treat customers, and what happens if a borrower falls into arrears.

In this guide, we’ll break the CCA down in plain English from a small business perspective so you can spot when it applies, avoid common pitfalls, and set up compliant processes from day one.

What Is The CCA And Why Should Small Businesses Care?

The Consumer Credit Act 1974 (the CCA) is the law that governs consumer credit and consumer hire agreements in the UK. It covers things like fixed‑sum loans, running‑account credit (for example, store cards), hire‑purchase, and consumer hire. Even though the FCA took over regulation in 2014, the CCA still sets essential rules about agreement content, customer rights and the consequences of non‑compliance.

Why you should care:

• If you offer customers the option to pay over time (with interest or fees), you may be entering “regulated credit agreements” under the CCA.
• If you broker finance for customers (introducing them to a lender), you may be carrying on a regulated activity that requires FCA authorisation.
• Non‑compliance can invalidate agreements, limit what you can enforce, and expose you to regulatory action or customer claims.

Put simply, if credit is part of your customer journey, you need to understand when the CCA applies and build compliant processes alongside your Terms of Sale and other customer documents.

When Does The CCA Apply To My Business?

The CCA regulates “consumer” credit agreements made with an “individual”. In CCA terms, “individual” includes:

• Private consumers
• Sole traders
• Unincorporated partnerships with up to three partners
• Unincorporated associations

Limited companies and LLPs are not “individuals” for CCA purposes, but be careful: many micro‑business customers are actually sole traders or small partnerships, so the CCA can still bite even in a business‑to‑business context.

Broadly, the CCA will apply if:

• You provide credit (deferred payment, a cash loan, or other financial accommodation) to an individual; and
• The agreement is not excluded or exempt (more on exemptions below); and
• You do this by way of business (not a one‑off between friends).

Common examples where a small business may trigger the CCA:

• Offering customers the ability to split payments over several months with interest or fees.
• Arranging third‑party finance at checkout as a credit broker.
• Providing hire‑purchase on equipment or vehicles to sole traders.
• Issuing store credit or running‑account credit to consumers.

Are There Any Exemptions (Including “Buy Now, Pay Later”)?

Yes. Some credit arrangements are exempt from FCA regulation and the CCA’s “regulated agreement” regime. One key exemption many retailers rely on is the so‑called “BNPL” exemption under the Regulated Activities Order (RAO):

• It must be a borrower‑lender‑supplier agreement (you supply the goods/services and provide the credit yourself);
• It’s interest‑free and you don’t charge any credit fees (no admin or default fees baked into the credit price);
• It’s repayable in 12 or fewer instalments within 12 months; and
• You’re not a “domestic premises” seller (e.g. door‑to‑door sales).

If you meet those conditions, the agreement may be exempt from regulation. However, if you add interest, late fees, or stretch repayments beyond 12 months, you likely leave the exemption and the CCA may apply.

There’s also a business‑purposes exemption under the CCA for sole traders and small partnerships where the credit is for wholly or predominantly business purposes and the credit exceeds £25,000 (usually confirmed by a prescribed declaration). Below that threshold, the agreement can still be regulated even if the borrower is using the credit for their business.

Because exemption conditions are technical, get tailored advice before you launch an instalments product or finance option. At a minimum, align your customer legals such as Subscription Terms and Conditions and website Website Terms and Conditions with the intended credit structure.

What If I Broker Finance Or Chase Arrears - Do I Need FCA Authorisation?

Several activities connected with consumer credit are “regulated activities” under the Financial Services and Markets Act 2000 (FSMA). If you carry them on by way of business, you typically need FCA authorisation unless an exemption applies. These include:

• Credit broking (introducing customers to a lender for credit agreements);
• Debt counselling or debt adjusting (advising on or negotiating debts);
• Debt collecting (if you collect debts on behalf of others);
• Operating an electronic system in relation to lending (e.g. P2P platforms);
• Consumer hire and entering into regulated credit as a lender.

Many retailers use authorised third‑party finance providers at checkout, which can simplify the regulatory burden. If you act as an introducer or broker, you still need to ensure your status and permissions are appropriate and that your customer journey and promotions comply with the FCA’s Consumer Credit Sourcebook (CONC).

Separately, think about your processes when payments are missed. You’ll still need robust systems for invoicing and chasing late payments, ideally supported by clear invoice and collections practices under UK law. If you ever consider selling overdue accounts, make sure your credit terms permit assignment and understand the steps for selling debt to a collection agency.

What Does The CCA Require In Practice?

If you’re entering regulated agreements as a lender (or brokering them), the CCA and FCA rules impose a range of requirements. Here are the key areas small businesses need to plan for.

1) Pre‑Contract Explanations And Creditworthiness Checks

• You must provide prescribed pre‑contract information (often via the SECCI form) in good time before the customer enters the agreement.
• Give “adequate explanations” so the customer understands the key features, costs and risks.
• Assess creditworthiness (affordability) using proportionate checks - not just a credit score.

2) Form And Content Of Agreements

• Agreements must include prescribed terms (like the amount of credit, repayments, rate, charges) in a compliant format.
• Missing or misstating prescribed terms can render the agreement unenforceable without a court order.
• Provide copies at the right times (pre‑contract, post‑signing) and honour cancellation rights where applicable.

3) Arrears, Default And Termination

• There are strict rules about notices of sums in arrears, default notices, and timeframes before you can terminate or enforce.
• Certain charges and interest in default are restricted; they must be fair and reflect actual costs.
• Customers have rights to early settlement with statutory rebates in some agreements.

4) Advertising And Promotions

• Financial promotions must be clear, fair and not misleading; trigger words in adverts can require representative APRs and cost information.
• “No fees” or “0%” claims must be accurate and consistent with the actual agreement structure.

5) Data Protection And Customer Information

• Credit decisions involve personal data, so you must comply with UK GDPR and the Data Protection Act 2018, including having a clear Privacy Policy and appropriate consents and lawful bases.
• Make sure your lenders, brokers and credit reference agencies are covered by proper data sharing terms or a Data Processing Schedule where relevant.

These rules need to sit neatly alongside other consumer‑facing compliance, such as accurate pricing and refunds under the Consumer Rights Act 2015 and cancellation rights under the Consumer Contracts Regulations for distance sales. If you sell online, ensure your checkout terms, refund processes and returns policy align with those obligations.

How Does The CCA Affect Your Contracts And Customer Journey?

If you’re offering finance in‑house or via a partner, take a holistic look at your documents and customer flow. Map out the journey from first marketing touchpoint to final payment and ask, at each step, “Are we compliant and clear?”

Contracts You’ll Typically Need

• Customer‑facing terms: robust Terms of Sale (for point‑of‑sale transactions) or Website Terms and Conditions (for online sales), with clear payment, delivery, and cancellation clauses.
• Credit documentation: a compliant credit or hire agreement (and associated pre‑contract information) tailored to your product and whether it’s regulated or exempt.
• Broker/finance partner agreements: if you introduce customers to lenders, your commercial contract with the lender must handle responsibility for compliance, commissions, complaints and data flows.
• Internal playbook: policies for affordability checks, arrears handling and complaint resolution so staff follow the same compliant steps every time.

If you’re lending to other businesses or want to finance suppliers or franchisees, you’ll also want well‑drafted Loan Agreements and appropriate security documents. Even outside the consumer space, clarity on interest, events of default and enforcement saves headaches later.

What Are The Risks Of Getting The CCA Wrong (And How Do You Mitigate Them)?

The risks are real - but manageable with the right setup.

• Unenforceable agreements: If prescribed terms or notices are missing, you may need a court order to enforce, or you could lose entitlement to interest/charges.
• Regulatory action: Trading without the correct permissions or breaching conduct rules can lead to FCA action, redress requirements and reputational damage.
• Customer claims: Customers may seek refunds, compensation or raise statutory defences (for example, under connected lender liability rules).
• Data protection breaches: Poor data practices around credit checks and arrears can trigger fines or complaints.

Practical mitigation steps:

• Decide early whether you want to offer exempt instalments, partner with an authorised lender, or become authorised yourself.
• Get your customer journey reviewed end‑to‑end, including advertising, pre‑contract information, scripts and template documents.
• Train staff and implement consistent arrears processes aligned with CONC’s forbearance expectations.
• Keep your e‑commerce terms and distance selling compliance tight, especially for online purchases under the Consumer Contracts Regulations and distance selling laws.
• Use clear, fair, and accessible language in all customer documents and communications.

Frequently Asked Questions About The CCA

Does The CCA Apply To Limited Companies?

No - limited companies (and LLPs) are not “individuals” under the CCA. However, sole traders and small partnerships can be within scope. Also remember other laws still apply to companies, and your standard Terms of Sale should clearly cover payment, delivery and remedies.

Is “Pay In 3” Always Exempt?

Not always. To rely on the exemption, the credit must be interest‑free, fee‑free, within 12 instalments over 12 months, and part of a borrower‑lender‑supplier structure (with no doorstep selling). If you charge late fees or extend beyond 12 months, you likely lose the exemption.

We Introduce Customers To A Finance Partner - Are We A Credit Broker?

Probably, yes. Introducing consumers to a lender is usually credit broking and requires FCA permission unless you fall within a limited scope exemption. Your marketing and handover to the lender must also meet FCA conduct standards.

What About Online Sales And Cancellations?

If you sell at a distance (e.g. online), you’ll also need to comply with the Consumer Contracts Regulations on pre‑contract information and cancellation rights, separate from the CCA. Make sure your website legals, including Website Terms and Conditions and returns process, reflect those rules.

Key Takeaways

• The CCA is the backbone of UK consumer credit - it applies to many in‑house finance and hire arrangements with consumers, sole traders and unincorporated businesses.
• Some instalment plans are exempt (e.g. interest‑free, fee‑free “pay in 3” within 12 months), but the conditions are strict - if you add interest or fees or extend the term, you may fall back into regulation.
• Broking finance, lending, collecting debts and related activities are regulated and often require FCA authorisation and compliance with CONC.
• Plan your customer journey end‑to‑end: clear pre‑contract information, affordability checks, compliant agreement wording, fair arrears handling, and strong data protection via a suitable Privacy Policy and data processing terms.
• Integrate your credit processes with robust customer contracts like Terms of Sale and online Website Terms and Conditions, and keep your returns policy and distance selling compliance up‑to‑date.
• Getting the CCA wrong can make agreements unenforceable and trigger regulatory risk - a short setup project now will save major time and cost later.

If you’d like help assessing whether your product is CCA‑regulated, drafting compliant customer credit documents, or reviewing your customer journey for FCA and consumer law compliance, you can reach us at 08081347754 or team@sprintlaw.co.uk for a free, no‑obligations chat.