The consumer credit sector is a cornerstone of the UK financial services industry, providing necessary access to credit for millions of households across a wide spectrum of financial needs – from personal loans, credit cards, motor finance and increasingly popular buy now, pay later products.
Consumer credit is a multi-billion-pound industry. Traditional lenders like banks and building societies still dominate the market, but alternative finance providers and fintechs, such as peer-to-peer platforms and electronic money institutions, have all gained transaction.
The sector continues to play a critical role in supporting consumer spending and economic resilience, particularly as households navigate cost-of-living pressures and fluctuating economic conditions.
Right now, the industry is undergoing significant transformation, influenced by economic pressures, regulatory reform and consumer behaviour.
Economic uncertainty has dampened consumer confidence and encouraged lenders to take a more measured view of their risk appetite. At the same time, regulatory scrutiny is intensifying, with the FCA implementing the Consumer Duty in 2023 and progressing with reforms to the Consumer Credit Act to enhance consumer protection and modernise outdated legislation.
Additionally, the sector must respond to evolving consumer expectations around transparency, digital accessibility and responsible lending practices.
Together, these factors are reshaping the landscape of consumer credit in the UK, prompting firms to adapt their strategies to remain compliant, competitive and customer focused.
So what are some of the current hot topics?
One is the rise of buy now, pay later products which has grown significantly in recent years. BNPL firms will be brought into the FCA’s regulatory perimeter from July 2026 and will be subject to a new set of rules which have been proposed by the FCA. This will include complying with the Consumer Duty and ensuring products are delivering good customer outcomes. Firms will need to carefully consider what the FCA’s proposed rules will mean for their business.
Another is the FCA’s ongoing review into the historical use of discretionary commission arrangements in the motor finance sector. After a seminal Supreme Court judgement in August, the FCA has announced it will be consulting on an industry wide redress scheme. Firms impacted will need to be prepared and ensure they have adequate support to navigate the challenges ahead.
More broadly, there remains a continued focus around digital transformation, including investment in AI and open banking, operational resilience and financial inclusiveness.
The consumer credit sector is at a crossroads. Economic uncertainty, regulatory reform and disruptive technology are reshaping the landscape. But with challenge comes opportunity for firms that can adapt and innovate.
