Barclays Chief Executive CS Venkatakrishnan has called for a comprehensive reform of the Consumer Credit Act, arguing that the legislation hampers banks’ willingness to lend to consumers. Speaking in early July, Venkatakrishnan, also known as Venkat, urged the incoming chancellor, chosen by Labour leader Andy Burnham, to review the Act’s provisions, which he said have made lenders overly cautious due to the liabilities imposed on them.
The Consumer Credit Act, established in 1974, governs personal loans and credit card agreements, and was designed to offer significant protections to consumers. One key protection requires lenders to share liability with suppliers when a product purchased on credit fails to perform as expected. Venkat explained that this aspect, known as “connected lender liability,” means banks can be held responsible if, for example, a heat pump or solar panel financed through a loan does not work properly. He maintained that this liability discourages banks from extending credit, thus limiting consumer access to financing.
The UK government announced plans in May to modernize the Consumer Credit Act, focusing on improving transparency around credit costs. However, it deferred changes related to the connected lender liability, citing the complexity and broad implications of reforms in this area. Officials stressed the need for further policy analysis and stakeholder consultation before advancing proposals.
Venkat’s comments come amid leadership changes expected in Downing Street this month, with Andy Burnham likely to succeed Rachel Reeves as chancellor. Reeves had prioritized increasing risk appetite within the financial sector and sought to reduce regulatory burdens on businesses to stimulate growth. Nevertheless, concerns about regulatory constraints persist across parties. Conservative leadership hopeful Kemi Badenoch recently criticized what she described as an entrenched “culture of risk aversion” in the City of London, pledging to remove obstacles to economic acceleration under a future Tory government.
The Consumer Credit Act has also played a central role in a high-profile mis-selling scandal involving motor finance lenders, including Barclays. The bank has set aside £325 million to compensate customers impacted by inappropriate car loan practices dating from 2007 to 2024. The Financial Conduct Authority (FCA) is pressing for a broad redress scheme affecting an estimated 12 million motorists, with projected payouts reaching £7.5 billion.
Several lenders, including Crédit Agricole Auto Finance and the financing divisions of Volkswagen and Mercedes-Benz, have challenged the FCA’s scheme in court. Venkat acknowledged Barclays’ responsibility for errors in motor finance dealings but criticized the retrospective assessments and compensation calculations as disproportionate. He emphasized that the bank accepts liability for its mistakes but questioned the fairness of the regulatory approach.
As the UK government considers reforms, the debate continues over how best to balance consumer protection with the need to encourage lending and economic growth. Venkat’s call for a detailed review of the Consumer Credit Act highlights the ongoing tension between regulation and risk appetite in the financial services sector.