Borrowing guides

When a cash advance or other short-term debt has spiralled into something you can no longer manage alongside other bills, two of the routes you’ll come across are an Individual Voluntary Arrangement (IVA) and a Debt Management Plan (DMP). They’re often mentioned in the same breath, but legally they’re very different tools, with different consequences if you fall behind.

An IVA is a formal, legally binding insolvency procedure

GOV.UK guidance describes an IVA as an agreement with your creditors to pay all or part of your debts, made through a licensed insolvency practitioner who collects a single monthly payment and distributes it among the creditors included in the arrangement. What makes it formal is the approval mechanism: GOV.UK confirms the IVA starts once creditors holding 75% of your included debt (by value) agree to it, and once that threshold is met, it applies to all your creditors in the arrangement — including any who voted against it. That’s a meaningfully different legal position from a DMP, where no such binding vote exists.

A DMP is informal, and doesn’t bind your creditors

A Debt Management Plan works by agreeing a single, reduced monthly payment that’s shared out among your creditors at a rate you can afford, usually arranged through a free debt charity or a fee-charging provider. Crucially, it isn’t a legal procedure — each creditor has to individually agree to accept the reduced payment and, generally, to freeze interest and charges, and they can in principle withdraw from that informal agreement or continue contacting you, even while the plan is running. GOV.UK’s overview of debt options doesn’t class a DMP as insolvency at all, which is part of why it carries a different practical and reputational weight than an IVA.

What happens to your creditors once each is in place

Because an IVA is legally binding, GOV.UK confirms it stops included creditors taking further action against you for those debts once it’s approved — no further calls, letters or court action from them on the included debt, provided you keep to the arrangement. On a DMP, creditors who’ve agreed to participate generally pause active recovery action informally, but because there’s no court-backed mechanism forcing them to, a creditor can in theory resume contact or pursue the debt if it isn’t formally included and consenting.

Cost, duration and what happens to the debt at the end

An IVA typically runs for five to six years of fixed payments, after which any remaining included debt is written off — a defined end point built into the arrangement. A DMP has no fixed end date built into the plan itself; you keep paying at the agreed rate until the debts are repaid in full, which can take longer overall but means you’re paying off the actual amount owed rather than having a portion written off. IVAs generally carry insolvency practitioner fees built into the monthly payments, and because of the cost and formality involved, they tend to suit larger overall debt levels rather than smaller balances.

The record it leaves behind

An IVA is a formal insolvency procedure and is recorded on the public Individual Insolvency Register for the duration of the arrangement (and for three months after), and it has a significant, long-lasting impact on your credit file. A DMP isn’t a formal insolvency procedure and doesn’t appear on the Insolvency Register, though it will still be visible to lenders through your credit file, since missed or reduced payments are reported by the creditors involved regardless of which route you take.

FAQs

Can I switch from a DMP to an IVA later?

Yes, it’s possible to move from an informal DMP into a formal IVA if your circumstances or the scale of your debt make that more appropriate, though it means starting a new, separate process with an insolvency practitioner.

Do all my debts have to be included?

In an IVA, you and your insolvency practitioner agree which qualifying debts to include, and once approved it covers those included creditors. In a DMP, you typically include the unsecured debts you want covered, but you continue paying priority debts like rent, mortgage and utilities separately and in full, outside the plan.

Which route affects my ability to get credit more?

Both affect your credit file, but an IVA, as a formal insolvency entry on the public register, is generally viewed as more serious by future lenders than a DMP, which is an informal repayment arrangement rather than an insolvency record.

Bottom line

An IVA is a court-recognised, legally binding insolvency procedure that can force even dissenting creditors to accept reduced payments, with debt written off at the end. A DMP is a more flexible, informal agreement with no legal force behind it and no built-in write-off. Which fits depends on the scale of the debt and how much legal weight you need behind the arrangement — and it’s worth getting free advice from a debt charity before committing to either.

Sources

• GOV.UK: Options for dealing with your debts – Individual Voluntary Arrangements
• GOV.UK: Options for dealing with your debts, overview

Before 2014, a short-term loan that couldn’t be repaid on time could often be “rolled over” repeatedly, with fresh interest added each time, turning a small initial loan into a spiralling debt. The FCA specifically restricted this practice, and understanding those restrictions helps explain why modern short-term lending looks very different from how it operated a decade ago.

What a rollover actually is

A rollover is where, instead of repaying a short-term loan in full on its due date, the borrower extends it into a new loan term — usually because they can’t afford full repayment. Historically, this could happen repeatedly, with each rollover adding further interest and fees on top of the original amount borrowed. Without a limit on how many times this could happen, a relatively small loan could grow substantially larger over several rollovers, with the borrower paying far more in cumulative interest than the original amount they’d borrowed.

The two-rollover limit

Tougher FCA rules took effect on 1 July 2014, and one of the central measures was a hard cap: high-cost short-term credit lenders are limited to rolling a loan over a maximum of two times. Once a loan has been rolled over twice, the FCA’s rules confirm the lender cannot roll it over again, regardless of the borrower’s circumstances at that point — the loan has to be repaid, restructured through a different route such as a repayment plan, or the borrower needs to be signposted elsewhere. This directly targeted the specific harm of loans being extended indefinitely, capping the maximum number of times a single loan’s term could be pushed back.

The information sheet requirement

Before any rollover can happen at all, the same FCA rules require the lender to give the borrower an information sheet explaining where and how to get free debt advice. This isn’t a passive disclosure buried in loan terms — it’s a specific, mandated intervention point, designed to put free, independent debt advice in front of a borrower at exactly the moment they’re about to extend a loan they’ve already struggled to repay on time, rather than simply processing the rollover as a routine transaction.

Restrictions on Continuous Payment Authority attempts

Rollovers weren’t the only mechanism the FCA restricted. Many short-term lenders collect repayments using a Continuous Payment Authority (CPA), a standing permission to take payments from a borrower’s debit or credit card. The FCA’s 2014 rules limited lenders to a maximum of two unsuccessful attempts to use a CPA to collect a repayment, and specifically prohibited using a CPA to take a part-payment instead of the full amount without the borrower’s separate agreement. This closed off a previous pattern where lenders could make repeated attempts to take money from an account, sometimes triggering unauthorised overdraft charges the borrower hadn’t budgeted for, and prevented a lender from simply taking whatever partial amount happened to be available rather than what was actually agreed.

How this fits with the wider price cap

• The FCA’s price cap, also effective from 2 January 2015, separately limits interest and fees on high-cost short-term credit to no more than 0.8% of the amount borrowed per day.
• Default fees for missed payments are capped at £15, with interest on the outstanding balance continuing only at the original daily rate — not an escalated default rate.
• A total cost cap means a borrower must never pay back more in total fees and interest than the amount they originally borrowed, effectively limiting the total cost of a loan to no more than 100% of the sum borrowed, however it was structured or extended.

Why “taking a new loan to repay an old one” isn’t a loophole-free workaround

Because the two-rollover limit applies to extending the same loan, some early concern focused on whether a borrower could simply take out a fresh loan with a different lender to repay an existing one, effectively achieving the same outcome as an unlimited rollover through a different route. This is part of why affordability assessment rules matter alongside the rollover limit — a lender is required to assess whether a new loan is genuinely affordable for that borrower, which is intended to catch a pattern of serial borrowing to repay existing short-term debt, not just a single loan being extended past two rollovers.

FAQs

Can a lender ever roll over a loan more than twice in genuinely exceptional circumstances?

No — the two-rollover limit is a hard cap under FCA rules, not a guideline a lender can depart from at its discretion. Once two rollovers have happened, that specific loan cannot be rolled over again.

What should I do if a lender keeps attempting to take payment from my card?

You’re entitled to cancel a Continuous Payment Authority directly with your bank at any time, and lenders are limited to two unsuccessful CPA attempts before needing to contact you rather than continuing to try. Persistent attempts beyond this, or attempts to take a part-payment without your agreement, can be raised as a complaint with the lender and, if unresolved, the Financial Ombudsman Service.

Does the two-rollover limit mean I only get charged interest twice?

No — the rollover limit caps how many times the loan’s term can be extended, not how interest accrues generally. The separate 0.8%-a-day price cap and 100% total cost cap are what actually limit how much interest and fees can build up overall.

Sources

• FCA: Tougher rules for payday lenders take effect
• FCA: FCA confirms price cap rules for payday lenders

Not repaying a short-term loan doesn’t lead straight to court — lenders generally have to follow a set process first. But if a debt genuinely isn’t resolved, a county court claim and a County Court Judgment (CCJ) are the formal legal end point, and both have real, lasting consequences worth understanding before it gets that far.

What happens before court: the pre-action stage

Under the Pre-Action Protocol for Debt Claims, a creditor is expected to send a formal letter before claim, setting out what’s owed and how it was calculated, before issuing court proceedings — this isn’t optional good practice, it’s a procedural expectation courts take into account. This stage is also where FCA-regulated lenders’ own conduct rules apply, including requirements around treating customers in financial difficulty fairly and signposting free debt advice, rather than moving straight to litigation.

If a claim is actually issued: how to respond

If a claim reaches court, GOV.UK’s guidance on responding to a money claim is specific: you must respond by the date given on the claim form or letter you receive, and if you can’t pay the full amount immediately, you can request an extra 14 days to respond. There are three broad ways to respond: pay the full amount claimed, make an offer to settle for less if you genuinely believe you owe less, or defend the claim entirely if you dispute owing the money at all. Critically, GOV.UK warns that failing to respond by the deadline can mean you end up paying more, or having a County Court Judgment (CCJ) entered against you by default — responding, even just to acknowledge the claim and ask for more time, is almost always better than ignoring it.

How a CCJ gets registered

According to Registry Trust, which maintains the official public register of judgments on behalf of the Ministry of Justice, a judgment is entered either because the creditor wins the case or because the debtor simply doesn’t respond within the relevant timeframe — at which point judgment details are sent to Registry Trust for the official register, and the same data is shared with credit reference agencies, meaning it typically shows up on your credit file too. This can happen without the debtor ever setting foot in a courtroom, which is exactly why responding to the original claim matters so much.

The 30-day rule that genuinely changes the outcome

There’s a specific, valuable window worth knowing about. Registry Trust’s guidance confirms that if you pay the full amount within one calendar month of the judgment being entered, and provide proof to the court, the CCJ can be removed entirely from both the register and your credit file — effectively as though it never happened. Miss that 30-day window and pay later, and the outcome is different: the judgment is marked “satisfied” rather than removed, meaning it stays visible on the register and your credit file for the full six years from the date of judgment, just showing that it was eventually paid and when. Either way, a CCJ that’s simply never paid at all remains visible, unsatisfied, for that same six-year period.

What a CCJ actually means in practice

• It’s recorded on the Register of Judgments, Orders and Fines, a public record that mortgage lenders, other credit providers and some employers can check, and it’s shared with credit reference agencies.
• It stays on record for six years from the date of judgment, regardless of when — or whether — the underlying debt is eventually paid, except where the 30-day removal window is used.
• A CCJ being entered doesn’t itself enforce payment — if you still don’t pay after judgment, a creditor can apply for separate enforcement action, such as a warrant of control, an attachment of earnings order, or a charging order against property.
• Getting a CCJ later on your record can make it noticeably harder and more expensive to get further credit, including mortgages, for as long as the judgment remains visible.

If you think the claim itself is wrong

A claim isn’t automatically valid just because it’s been issued — you can dispute the amount owed, argue the debt is statute-barred (too old to be legally enforceable, generally after six years of no acknowledgement or payment for most consumer debts), or raise a genuine dispute about whether the debt exists at all. This is also where the Consumer Credit Act’s unfair relationships provisions, or a complaint already raised with the Financial Ombudsman Service, can be relevant as part of defending a claim, rather than simply accepting it. Free debt advice services can help assess whether a claim is genuinely valid before you decide how to respond.

FAQs

Can I still negotiate with a creditor after being sent a letter before claim?

Yes — reaching an agreement at this stage, including a repayment plan, can avoid court action altogether. Creditors following the Pre-Action Protocol for Debt Claims are generally expected to be genuinely open to this, not simply going through the motions before issuing a claim regardless.

Does a CCJ mean bailiffs will automatically come to my home?

No — a CCJ on its own is just a judgment recording that you owe the money. Further enforcement action, like sending enforcement agents (formerly bailiffs), requires a separate, additional step by the creditor, and isn’t automatic just because a judgment exists.

Can a CCJ be removed if it was entered by mistake?

Yes, in certain circumstances — you can apply to the court to have a judgment set aside, for example if you never actually received the claim, or you have a genuine defence you weren’t able to raise in time. This is a separate legal process from the standard 30-day payment removal route.

Sources

• GOV.UK: Respond to a court claim for money
• Registry Trust: Ultimate guide to CCJs

Short-term lenders aren’t the only regulated option if you need to borrow a relatively small amount at short notice. Credit unions are a genuinely regulated, FSCS-protected alternative — and by law, they can’t charge anywhere near the interest rates that high-cost short-term credit is known for.

What a credit union actually is

Citizens Advice describes a credit union as a self-help co-operative whose members pool their savings to provide each other with credit at a low interest rate. Unlike a commercial lender, a credit union is owned and controlled by its own members rather than shareholders, and it’s run on a not-for-profit basis — any surplus is typically returned to members as a dividend on their savings, rather than extracted as profit for outside investors. This ownership structure is a genuinely different model from a short-term lender, where the loan book exists to generate a commercial return.

The “common bond” requirement

You can’t simply join any credit union in the country — membership legally requires a “common bond” with other members, which might be based on where you live or work, your employer, your occupation, or membership of an organisation such as a church or trade union. Citizens Advice notes that if one member of your household already belongs to a credit union, other relatives at the same address can usually join too. In practice, this means checking which specific credit union serves your area or employer, rather than assuming any credit union will accept you as a member.

The legal cap on what a credit union can charge

This is where the comparison with short-term lending is most stark. By law, credit unions in England, Scotland and Wales cannot charge more than 3% interest a month on a reducing balance, which works out at a maximum APR of around 42.6% — a legal ceiling set out in regulations under the Credit Unions Act 1979 framework. Northern Ireland has a separate, even lower statutory cap of 1% a month. Citizens Advice puts the practical comparison plainly: credit union loans usually work out cheaper than home credit or payday loans, reflecting how far apart the two markets sit in cost, even though both can serve people who might otherwise struggle to access mainstream bank lending.

How credit union loans are regulated

Credit unions are dual-regulated: authorised by the Prudential Regulation Authority and regulated by both the PRA and the Financial Conduct Authority, the same conduct regulator responsible for short-term lenders. This means a credit union member gets the benefit of FCA conduct standards — including affordability assessments and fair treatment rules — layered on top of the not-for-profit ownership structure and the statutory interest rate cap.

FSCS protection

Because credit unions are authorised deposit-takers, savings held with a UK credit union are protected by the Financial Services Compensation Scheme in the same way as a bank or building society. The FSCS confirms that if a UK-authorised bank, building society or credit union fails, savers are automatically compensated up to £120,000 per eligible person, per institution — a limit that was raised to that level from 1 December 2025. This matters specifically for anyone considering a credit union not just for borrowing, but for building up savings alongside a loan, which many credit unions actively encourage as part of membership.

Where credit unions have real limits compared to short-term lenders

• Not every area or employer has an accessible local credit union, so the common bond requirement can genuinely rule out membership for some borrowers, unlike an online short-term lender available nationally.
• Loan approval and payout can take longer than an online short-term loan, since many credit unions are smaller organisations without the same automated, near-instant underwriting systems.
• Credit unions may still decline an application based on affordability or a poor repayment history, just as any regulated lender would — membership doesn’t guarantee approval for a loan.

FAQs

Do I have to be a saver to borrow from a credit union?

Not always, but many credit unions require or strongly encourage some level of regular saving alongside borrowing, as part of the co-operative, member-ownership model. Requirements vary by individual credit union, so it’s worth checking the specific rules of the one serving your area.

Is a credit union loan regulated in the same way as a payday loan?

Yes — both are regulated consumer credit products under the FCA. The key practical difference is the legal interest rate cap and not-for-profit structure specific to credit unions, not a difference in the underlying regulatory oversight.

How do I find a credit union I’m eligible to join?

You’ll need to identify a credit union tied to your local area, employer, or another qualifying common bond, since there’s no single nationwide credit union — Citizens Advice and the Financial Conduct Authority’s register are useful starting points for finding one covering your circumstances.

Sources

• Citizens Advice: Credit union loans
• FSCS: Banks, building societies and credit unions

If short-term borrowing has turned into debts you genuinely can’t keep up with, a debt management plan is one of several formal routes for getting them under control — but it’s worth understanding exactly what it does and doesn’t do before assuming it works the same way as more formal insolvency options like an IVA.

What a debt management plan actually is

A debt management plan (DMP) is an informal, non-statutory arrangement for repaying unsecured debts — this includes most short-term loans, credit cards, overdrafts and catalogue debts, but not secured debts like a mortgage. GOV.UK’s guidance describes the basic mechanics: you either arrange the plan yourself directly with your creditors, or use a company that manages it on your behalf, making one regular payment to the company, which then shares that money out between your creditors according to an agreed plan.

Free vs fee-charging providers

Not all DMP providers charge for the service. Some well-known providers, including charities such as StepChange, offer free debt management plans funded through a different arrangement (often a voluntary contribution from creditors called “fair share” funding) rather than fees charged to the person in debt. Fee-charging DMP providers must be authorised by the Financial Conduct Authority, and where fees are charged, FCA rules require them to be reasonable and proportionate — administration charges taken from your monthly payment are commonly capped, but it’s worth checking exactly how much of an early payment goes toward fees rather than reducing your actual debt, since a poorly structured fee-paying plan can mean less of your money reaches creditors in the early months than you might expect.

Why a DMP is not legally binding on your creditors

This is the detail that surprises a lot of people, and it’s stated plainly in GOV.UK’s own guidance: unless it’s specifically agreed otherwise, your creditors can still ask you to pay your full debt at a later date, or take action to recover their money even if you keep up your DMP payments as agreed. A DMP is essentially an informal understanding that creditors have agreed to for now, not a court-approved arrangement that legally prevents further action — creditors who haven’t formally agreed to freeze interest or charges, or who later change their position, retain more legal room to act than they would under a formal insolvency solution.

How this compares to an IVA

An Individual Voluntary Arrangement (IVA) works very differently in one crucial respect: legal bindingness. GOV.UK confirms that an IVA is arranged through a licensed insolvency practitioner, who works out what you can realistically afford and for how long, and once creditors holding at least 75% of the debt (by value) agree to the proposal, it becomes binding on all your creditors — including any individual creditor who actually voted against it. A DMP has no equivalent formal binding mechanism; it works only for as long as, and to the extent that, each individual creditor continues to informally go along with it.

What a DMP can’t do that other options can

• It doesn’t automatically stop interest or charges accruing — some creditors agree to freeze these while a DMP is active, but this is a discretionary decision by each creditor, not a legal requirement, unlike some of the protections built into a formal insolvency solution.
• It doesn’t have a guaranteed end date in the same way a fixed-term IVA does; a DMP typically continues, and gets adjusted, for as long as it takes to repay the debts at an affordable rate, which can mean a much longer overall repayment period.
• It doesn’t write off any debt — you’re still committed to repaying the full amount over time, just at an adjusted, more manageable monthly rate, whereas an IVA or bankruptcy can, in the right circumstances, result in outstanding debt being written off.

When a DMP tends to be the right fit

A DMP generally suits someone who has a genuine, if reduced, ability to keep repaying their debts in full over a longer period, and who wants a single simplified monthly payment rather than juggling multiple creditors directly. It’s a lighter-touch option than formal insolvency, without the same impact on things like certain types of employment or the ability to act as a company director that can come with bankruptcy. Where debts are unaffordable even at a reduced rate, or where a faster, legally binding resolution (including potential debt write-off) is needed, an IVA, debt relief order or bankruptcy may be more appropriate — which is exactly why free, regulated debt advice before committing to any one option is consistently recommended rather than picking a route based on marketing alone.

FAQs

Will a debt management plan affect my credit file?

Yes — entering a DMP is typically recorded on your credit file and can affect your ability to get further credit while it’s active, in a similar way to missed or reduced payments generally being visible to future lenders.

Can I still be taken to court while on a debt management plan?

Yes, in principle, since a DMP isn’t legally binding on creditors. In practice, creditors often don’t pursue court action while payments under an agreed DMP are being maintained, but this isn’t a guarantee, and it can vary by creditor.

Do I have to use a company to set up a DMP, or can I do it myself?

You can negotiate directly with your own creditors without using a company at all. Many people use a free debt advice provider instead, both for the negotiation itself and for ongoing help managing the plan, without paying management fees.

Sources

• GOV.UK: Options for dealing with your debts — Debt management plans
• GOV.UK: Options for dealing with your debts — Individual Voluntary Arrangements

Most of the day-to-day rules on short-term lending now come from the Financial Conduct Authority’s own rulebook rather than an Act of Parliament. But the Consumer Credit Act 1974 hasn’t disappeared — several of its provisions still sit underneath FCA regulation and give borrowers real legal protections that are separate from, and in addition to, FCA rules.

Why the CCA still matters alongside FCA regulation

Consumer credit regulation moved from the Office of Fair Trading to the FCA in April 2014, and government has since been reforming parts of the Consumer Credit Act 1974 (CCA), shifting much of its detailed technical content into FCA rules instead. But two of the Act’s most consumer-relevant provisions — connected lender liability under section 75, and the unfair relationships test under sections 140A to 140C — have deliberately been left in place for now, rather than being replaced, because reform proposals have specifically identified them as complex, well-established provisions underpinned by a significant body of case law that shouldn’t be disturbed without careful separate work.

Section 75: connected lender liability

Section 75 makes a credit provider jointly liable, alongside the seller or supplier, for certain breaches of contract or misrepresentation connected to a purchase made using credit. It was designed around credit cards, and its application to short-term or instalment loans is narrower and more fact-specific — it generally requires a direct arrangement between the lender and the supplier of the goods or service purchased with that credit, rather than applying automatically to every loan a lender provides. Where it does apply, it means a borrower isn’t left solely chasing the supplier if something goes wrong; the credit provider shares legal responsibility.

Sections 140A–140C: the unfair relationships test

This is arguably the more broadly useful protection for short-term borrowing specifically. Under section 140A, a court can intervene if it determines the relationship between a creditor and a debtor is unfair to the debtor, because of the terms of the credit agreement itself, the way the creditor has exercised or enforced its rights, or any other thing done, or not done, by or on behalf of the creditor. The court is required to consider all matters it thinks relevant, covering both the creditor’s and the debtor’s circumstances — which gives it broad discretion to look at the substance of how a loan was sold and managed, not just whether the paperwork technically complied with disclosure rules. Remedies a court can order include changing the terms of the agreement, reducing or discharging sums owed, or requiring the creditor to repay money already paid.

What this doesn’t cover

• The unfair relationships test doesn’t apply to every type of credit agreement — certain exempt agreements, including regulated mortgage contracts, sit outside its scope.
• Section 75 claims connected to short-term loans depend heavily on the specific facts of the arrangement between lender and supplier, so it’s not a guaranteed route in every dispute involving borrowed money.
• Neither provision replaces the FCA’s own rules on affordability, the price cap on high-cost short-term credit, or the Consumer Duty — they sit alongside FCA regulation as a separate, court-based legal route, generally used where a dispute has gone beyond what a complaint to the lender or the Financial Ombudsman Service has resolved.

How this fits with FCA-regulated redress routes

In practice, most disputes about short-term lending are resolved through the FCA’s own conduct rules and the Financial Ombudsman Service, which can investigate complaints about irresponsible lending, unfair treatment or unaffordable borrowing without a court case at all. The CCA’s unfair relationships provision becomes more relevant where a matter proceeds to court — for example, where a lender is pursuing a debt through the county court and the borrower wants to raise the fairness of the original relationship as a defence, or where redress through the Ombudsman hasn’t been pursued or has been exhausted. The two systems — FCA regulatory rules enforced through the Ombudsman, and CCA legal rights enforced through the courts — are complementary rather than substitutes for each other.

Why this history matters for borrowers today

Understanding that short-term lending sits under two overlapping legal frameworks explains why a loan can be technically compliant with FCA rules on the surface — clear pre-contract information, an affordability check carried out — and still potentially be challenged as part of an unfair relationship if the overall picture, including how the loan was later enforced or how charges were applied, was unfair in substance. It’s this substance-over-form approach that makes sections 140A to 140C a meaningful backstop, even in an FCA-regulated market.

FAQs

Do I need a solicitor to raise an unfair relationship claim?

Not necessarily for an initial complaint to the lender or the Financial Ombudsman Service, but a formal unfair relationships claim under section 140A is a court matter, and given its fact-specific, discretionary nature, most people pursuing one would benefit from legal advice.

Does Section 75 apply if I borrowed cash rather than buying something directly on credit?

Not typically in the same way — section 75 is built around a purchase made using credit, with a connection between the lender and supplier. A general cash loan without that direct purchase link sits outside its usual scope.

Is the Consumer Credit Act being scrapped completely?

No — government reform has been moving many of its technical, administrative provisions into FCA rules over time, but core consumer protections like section 75 and the unfair relationships test have specifically been retained rather than removed.

Sources

• legislation.gov.uk: Consumer Credit Act 1974, unfair relationships (sections 140A–140C)
• FCA: Review of retained provisions of the Consumer Credit Act — final report

If a short-term lender won’t resolve a genuine complaint — about irresponsible lending, unfair charges, poor treatment during financial difficulty, or almost anything else connected to how they’ve dealt with you — there is a free, independent route to get the dispute properly looked at, without needing a solicitor.

What the Financial Ombudsman Service is

The Financial Ombudsman Service, commonly called the FOS, is a free service set up by Parliament to investigate complaints about financial businesses, including lenders offering short-term and instalment credit. If it decides a financial business hasn’t treated a customer fairly, it has the power to order that things be put right — which can include changes to a debt, a refund of charges, or compensation, depending on what actually went wrong.

You have to complain to the lender first

The Ombudsman isn’t normally the first port of call. Before bringing a complaint to the FOS, you need to have made a formal complaint directly to the lender itself. The business generally has up to eight weeks to consider and respond to a complaint, though some specific categories — such as issues connected to payment services and electronic money — have a shorter statutory response window. If the lender either fails to respond within that time, or sends a final response you’re not satisfied with, you’re then entitled to escalate the matter to the Ombudsman.

The six-month window to escalate

Once a lender has sent its final response letter, you generally have six months from that date to refer the complaint on to the Financial Ombudsman Service if you remain unhappy. Missing this window can mean losing the right to have the Ombudsman consider the complaint at all, so it’s worth acting promptly once a final response arrives rather than letting it sit. If the eight-week period passes with no response from the lender at all, you don’t have to wait indefinitely — you can generally refer the complaint to the Ombudsman once that period has elapsed, even without a final response letter.

What kinds of complaints the FOS actually handles

For short-term and cash advance lending specifically, the Ombudsman regularly deals with complaints connected to unaffordable or irresponsible lending — where a loan should arguably never have been approved given the borrower’s circumstances — as well as disputes over charges, how continuous payment authority was used to collect repayments, and how a lender behaved once a customer got into financial difficulty. Published case studies from the Ombudsman cover exactly this kind of dispute, including cases where a borrower was found to have been given a loan they couldn’t realistically afford.

How the process actually works

• You complete the Ombudsman’s online complaint form, or contact them by phone or post, setting out what happened and what you’d like to see put right.
• An investigator is assigned to look into the complaint, gathering evidence and the business’s side of the story.
• The investigator reaches a view on the complaint; if either side disagrees, it can be escalated to a formal Ombudsman decision, which is binding on the business if accepted by the complainant.
• You don’t need to pay for representation — the service is explicitly designed to be usable without a solicitor or a claims management company acting for you, and using a paid representative doesn’t improve your chances of a better outcome.

What to gather before you complain

A complaint is generally stronger when it’s specific rather than a general expression of dissatisfaction. Before contacting the lender, it’s worth pulling together the loan agreement itself, statements showing what was repaid and when, any correspondence about financial difficulty you raised with the lender, and a clear timeline of what happened and when. If the complaint concerns affordability — the idea that the loan should never have been approved given your circumstances at the time — evidence of your income, existing debts and outgoings around the date of the loan can matter a great deal, since this is usually the central question an investigator will be assessing.

What the Ombudsman can actually award

Where a complaint succeeds, the remedy depends on what went wrong. For an unaffordable lending complaint, this can include refunding interest and charges on a loan, removing adverse information recorded on a credit file in connection with it, or in some cases writing off some or all of an outstanding balance. For complaints about poor treatment or process failures rather than the lending decision itself, the outcome might instead be a smaller award for distress and inconvenience, or a correction to how the account is recorded. The specific facts of the complaint drive the remedy — there’s no single fixed compensation figure that applies across all cases.

FAQs

Does it cost anything to use the Financial Ombudsman Service?

No, it’s free for consumers to bring a complaint. There is no need to pay a claims management company or solicitor to represent you — you’re able to explain your own complaint directly using the Ombudsman’s standard process.

What if the lender ignores my complaint completely?

If the eight-week response period passes without a proper response, you’re generally able to take the complaint to the Ombudsman regardless, rather than being stuck waiting on a lender that isn’t engaging.

Is the Ombudsman’s decision the final word?

If you accept an Ombudsman’s final decision, it becomes binding on the business, which must comply. If you’re not happy with the outcome, you’re not bound to accept it, though in most cases there isn’t a further appeal route beyond the Ombudsman’s own process, short of judicial review in narrow circumstances.

Sources

• Financial Ombudsman Service: How to complain
• Financial Ombudsman Service: Unaffordable lending

Short-term credit is, by its nature, often used by people going through a difficult financial period — and the regulator that oversees lenders has specific, binding expectations about how firms must treat customers who are in a vulnerable situation, whether that vulnerability is obvious or not.

Why the FCA focused specifically on this

The FCA published finalised guidance for firms on the fair treatment of vulnerable customers, aimed at driving genuine improvement in how firms treat customers who may be at greater risk of harm. The guidance was prompted partly by the FCA’s own research, which found that a very large proportion of UK adults — tens of millions — show characteristics of vulnerability at any given time, whether through poor health, a negative life event such as bereavement or job loss, low financial resilience, or low capability in dealing with financial matters. This isn’t a small, unusual minority of customers; it’s a substantial share of the people any consumer lender deals with regularly.

What counts as a “vulnerable” customer

The FCA’s guidance is deliberately broad rather than tied to a fixed checklist, because vulnerability can be temporary, fluctuating, or permanent, and can affect anyone. It commonly relates to one or more of four broad drivers: health (including physical or mental health conditions), life events (such as bereavement, relationship breakdown, job loss or domestic abuse), resilience (low ability to withstand financial or emotional shocks), and capability (low knowledge of financial matters, low literacy or numeracy, or low confidence managing money or using digital services). Someone can be in a temporarily vulnerable situation — for example, following a bereavement — without it being a permanent feature of who they are, and firms are expected to recognise that vulnerability can change over time.

What firms are actually expected to do

The guidance sets out concrete expectations rather than vague aspiration. Firms should understand the needs of their target market and customer base, including the likely presence of vulnerable customers within it. Staff need to have the skills and capability to recognise and respond appropriately to signs of vulnerability, not just process an application mechanically. Product design, customer service and communications should all take vulnerability into account — for example, offering alternative ways to communicate for someone who struggles with standard digital channels, or building in extra care around affordability assessments where vulnerability is disclosed or apparent. Firms are also expected to actively monitor and assess whether they are genuinely meeting the needs of vulnerable customers, rather than assuming good intentions are enough.

How this sits alongside the Consumer Duty

Following a review of firms’ practices, the FCA concluded its vulnerable customer guidance remains appropriate and continues to work alongside the Consumer Duty, which separately requires firms to act in good faith, avoid foreseeable harm, and support customers in pursuing their financial objectives. In effect, the vulnerable customer guidance gives specific, detailed expectations for a particularly high-risk group of customers, sitting underneath the broader outcomes-focused standard the Consumer Duty sets for everyone.

What this means if you’re struggling

• You are not obliged to disclose a health condition, bereavement or other personal circumstance to get fair treatment, but doing so — where you’re comfortable — can help a firm apply the extra care it’s expected to give.
• If you feel a lender has pressured you, ignored clear signs of difficulty, or made it hard to get help while you were going through a genuinely difficult period, this is directly relevant to a complaint, since it touches on the FCA’s specific vulnerable customer expectations.
• Ask directly whether a lender has options such as payment breaks, referral to free debt advice, or adjusted repayment arrangements — firms are expected to have genuine processes for this, not just a generic complaints line.

FAQs

Do I have to be formally diagnosed with something to count as “vulnerable”?

No. The FCA’s approach is based on characteristics and circumstances — including temporary situations like bereavement or job loss — rather than requiring a formal diagnosis or label before fair treatment obligations apply.

What can I do if I don’t think a lender treated me fairly given my circumstances?

Raise it directly with the lender’s complaints process first, referencing the specific circumstances involved. If you’re not satisfied with the outcome, you can escalate the complaint to the Financial Ombudsman Service, which can consider whether the firm met its regulatory obligations, including around vulnerable customer treatment.

Does this guidance give me a legal right to a specific outcome, like a fee waiver?

Not automatically — it sets expectations for how firms must approach and respond to vulnerability, rather than guaranteeing a specific financial outcome in every case. What it does do is give you a clear, recognised standard to point to if you feel a firm has fallen short.

Sources

• FCA: Guidance for firms on the fair treatment of vulnerable customers
• FCA: Treating vulnerable consumers fairly

If you pay for something on a credit card and it goes wrong — the goods never arrive, they’re faulty, or the retailer simply goes bust — you may have a direct legal claim against your credit card provider, not just the retailer. This protection is a genuinely valuable one, but it works quite differently from the short-term and instalment credit products this site otherwise focuses on, and it’s worth understanding exactly where it does and doesn’t apply.

What Section 75 actually does

Section 75 of the Consumer Credit Act 1974 makes a credit card provider jointly and severally liable, alongside the retailer or supplier, for a breach of contract or misrepresentation connected to something bought using the card. In practice, this means that if the retailer won’t put things right — whether because they’re refusing to engage, have gone into administration, or have simply disappeared — you can pursue the credit card company directly for a refund or compensation instead, because the law treats them as equally responsible for the transaction.

The £100 to £30,000 threshold

This protection only applies where the cash price of the item or service is more than £100 and not more than £30,000. Two details commonly catch people out here. First, it’s the total price of the item that has to fall in this range, not the amount actually charged to the card — so if you paid a £50 deposit by credit card towards a £600 purchase, the full £600 price is what’s assessed against the threshold, and the protection can still apply to the whole purchase even though only part of it went on the card. Second, this only covers credit cards specifically — it does not apply to debit cards, and does not apply to charge cards in the same way, because Section 75 is tied to regulated credit agreements rather than to card payments generally.

What it doesn’t cover

• Purchases where the total price is £100 or under, or over £30,000.
• Debit card transactions, since there is no credit agreement involved.
• Cash withdrawals made using a credit card.
• Situations where the card issuer and the supplier are effectively the same business — the “joint and several” liability requires a genuinely separate supplier.
• Some transactions made through certain payment intermediaries, where the direct contractual chain the law relies on isn’t present in the same way — though there are recognised exceptions for some payment processors that have a specific commercial agreement with the retailer.

Why this is different from short-term and instalment credit

Section 75 is specifically a credit card protection, tied to the structure of regulated credit card agreements. Short-term loans and cash advances aren’t credit cards, so this particular protection doesn’t transfer across to them in the same form — a short-term loan taken out to cover an unexpected cost doesn’t give you a Section 75-style claim against the lender if a purchase you later made with that borrowed cash goes wrong. If you’re comparing how to pay for something and want this kind of purchase protection specifically, that’s a genuine difference between paying by credit card and other forms of borrowing, and worth weighing up alongside cost when deciding how to fund a purchase.

How to actually make a claim

You contact your credit card provider directly, explain the breach of contract or misrepresentation, and provide evidence — receipts, correspondence with the retailer, and details of what went wrong. You don’t need to have tried and failed with the retailer first in every case, though in practice card providers often want to see that you’ve attempted to resolve it with the seller, particularly where the seller is still trading and contactable. If the card provider refuses or you’re unhappy with their response, you can escalate a Section 75 dispute to the Financial Ombudsman Service, in the same way as other financial services complaints.

FAQs

Does Section 75 apply if I only paid a deposit on my credit card?

Yes — as long as the total cash price of the item is between £100 and £30,000, you can still claim for the full amount even if only part of the payment went on the card, provided the credit card was used for at least part of the transaction.

Am I protected if I paid by debit card instead?

No, Section 75 does not apply to debit card payments, because it’s specifically tied to regulated credit agreements. Some debit card schemes offer a separate, voluntary protection called chargeback, but that works differently and isn’t a legal right in the same way.

Does Section 75 have anything to do with short-term loans or cash advances?

No — it’s a credit card-specific protection. If you take out a short-term loan and then use that cash to make a purchase, the loan itself doesn’t give you a Section 75 claim against the lender for problems with what you bought.

Sources

• Which?: Section 75 of the Consumer Credit Act
• legislation.gov.uk: Consumer Credit Act 1974, section 75

Since the Consumer Duty came into force, every FCA-regulated short-term lender in the UK has been held to a legal standard that goes well beyond simply following the rulebook — it requires them to actually deliver good outcomes for customers, including customers taking out cash advances and short-term loans.

What the Consumer Duty actually requires

The Consumer Duty sets the standard of care firms are expected to give retail customers, moving regulation away from a narrow compliance checklist and towards a genuine focus on outcomes. It is built around three cross-cutting rules that apply to how firms act throughout their relationship with a customer: they must act in good faith towards customers, avoid causing foreseeable harm to customers, and enable and support customers to pursue their financial objectives. These aren’t abstract principles — the FCA can and does take enforcement action against firms that fail to meet them.

The four outcomes borrowers should expect

Underneath the cross-cutting rules, the Duty sets out four specific outcomes firms must deliver:

• Products and services — what’s offered should genuinely be fit for the people it’s sold to, and should work in the way customers are reasonably led to expect.
• Price and value — the price charged should be reasonable relative to the benefit the product or service actually provides, with no unjustified or hidden costs.
• Consumer understanding — communications and terms should be clear enough that customers can actually understand what they’re agreeing to and make informed decisions, not buried in dense small print.
• Consumer support — customer service has to be genuinely helpful and accessible, including when things go wrong, and should not put up unreasonable barriers when a customer wants to make a complaint, switch, or exit a product.

What this means specifically for short-term credit

For a cash advance or short-term loan, the Duty means a lender is expected to have properly considered whether its product is designed for, and being sold to, the customers it’s actually reaching — not simply relying on an affordability check at the point of sale and treating that as the end of its responsibility. It also means fees and total repayable amounts have to be presented clearly enough that a borrower can genuinely understand the real cost before committing, and that getting help — whether that’s a payment difficulty, a complaint, or wanting early repayment information — shouldn’t be made deliberately difficult or slow.

Why this matters more for higher-risk lending

The FCA has been explicit that the Duty is not a one-size-fits-all standard applied identically everywhere — it expects firms to think harder about outcomes precisely where the risk of harm is greatest, which includes higher-cost, short-term credit aimed at financially squeezed customers. This connects directly to the FCA’s existing price cap on high-cost short-term credit and its separate guidance on vulnerable customers: the Duty adds an overarching, enforceable requirement that sits on top of those specific rules, rather than replacing them.

What to do if you think a lender isn’t meeting this standard

• Raise the specific issue with the lender directly first — under the Duty, their complaints process should genuinely be easy to use, not designed to discourage you.
• If you’re not satisfied with the response, or don’t get one within a reasonable time, you can escalate to the Financial Ombudsman Service, which can assess whether a firm has met its regulatory obligations, including under the Consumer Duty.
• Keep records of communications, including anything unclear or misleading in how a product’s cost or terms were presented to you — this kind of evidence is directly relevant to a Consumer Duty complaint.

How this connects to price and fair value

The price and value outcome is a genuinely practical one for short-term credit specifically, because it requires firms to be able to demonstrate — not just assert — that what they charge is reasonable against the benefit provided. In practice this means the FCA expects lenders to review their own pricing and fee structures against this standard on an ongoing basis, rather than setting a price once and treating it as permanently justified. For a borrower, this doesn’t translate into a fixed maximum price beyond the existing price cap rules, but it does mean a lender’s overall fee structure — including any optional add-ons, late payment charges or renewal fees — is something the regulator expects to be actively scrutinised for genuine value, not simply for technical legality.

FAQs

Does the Consumer Duty give me a right to a refund if I’m unhappy with a loan?

Not automatically — the Duty is a standard of conduct the FCA holds firms to, not a guaranteed right to compensation. However, if a firm has genuinely failed to meet the Duty’s requirements and this caused you harm, that failure can support a complaint to the firm or, ultimately, the Financial Ombudsman Service.

Does the Consumer Duty apply to every lender I might borrow from?

It applies to firms authorised and regulated by the FCA. Checking a lender is on the FCA Register in the first place is the necessary first step, since the Duty’s protections rely on the firm being properly regulated.

Is the Consumer Duty the same thing as the price cap on short-term credit?

No. The price cap is a specific numerical limit on interest and charges for high-cost short-term credit. The Consumer Duty is a broader standard of conduct covering how products are designed, priced, communicated and supported — the two work alongside each other rather than being the same rule.

Sources

• FCA: About the Consumer Duty
• FCA: Consumer Duty sets higher standards for financial services customers