With deadlines for new consumer duty looming, you may wonder what responsibilities your business has to ensure that your products meet consumer needs. For car dealerships and car finance brokers, you need to understand your role in the product distribution chain.
In this article, we’ll provide guidance surrounding product manufacturing under New Consumer Duty to ensure you can confidently navigate this new regulatory landscape.
In this piece…
What is the regulatory requirement, and when is the deadline?
There is an imminent deadline set out by the FCA, which falls on the 30th of April, 2023. This requires product manufacturers to have completed all necessary reviews to meet the outcome rules for existing car finance products and services.
So, what are the definitions of a product manufacturer, co-manufacturer and distributor?
Product Distributors are organisations who offer, sell, recommend or provide a car finance product or service.
Product Manufacturers are firms that create, develop, design, manage or underwrite a car finance product or service. More than one organisation may be involved in the manufacture of a single product: this is called a co-manufacturer.
Co-manufacturers set the parameters of a car finance product and commission other organisations to build/sell it.
Don’t get caught out: understanding your role in the Consumer Duty distribution chain
The New Consumer Duty applies to any organisation that acts as a product manufacturer or distributor, even if they don’t deal directly with retail customers.
The duty is a game-changer that affects every business involved in the distribution chain. If you’re a product manufacturer or distributor and your activities influence customer outcomes, then you’re within the scope of Consumer Duty. But what does ‘distribution chain’ mean? And what constitutes as ‘material influence’?
The FCA doesn’t provide clear-cut definitions, but it’s crucial to understand your responsibilities as a car finance broker or car dealership.
Are you in a distribution chain?
Distribution chains are a common concept in some industries but less familiar in others. Essentially, a distribution chain involves a product manufacturer who creates the product and a product distributor who sells it to the customer.
Under the new Consumer Duty, car finance brokers and car dealerships can determine where they sit in a distribution chain and whether they’re a co-manufacturer or product distributor by looking at their level of involvement in the design and manufacture of the financial product they’re selling.
If the car finance broker or car dealership is actively involved in the design and manufacture of the product, they may be considered a co-manufacturer. This means they’ll have a greater level of responsibility for ensuring the product meets the customer’s needs and complies with regulatory requirements.
However, if the car finance broker or car dealership sells a financial product designed and manufactured by someone else, they may be considered a product distributor. As a product distributor, they’ll still have responsibilities for ensuring the product meets the customer’s needs and complies with regulatory requirements. Still, their responsibilities will be less than those of a co-manufacturer.
If you’re a car dealership or car finance broker, it’s essential to understand your responsibilities under the new Consumer Duty. The regulations distinguish between product distributors and co-manufacturers, and knowing which category you fall under is crucial. Failure to comply with the regulations could result in severe consequences for your business.
However, navigating the ever-changing compliance landscape can be challenging. That’s why partnering with Marsh is a smart move. Our leading compliance consultancy (Marsh Valued Partnerships) service helps car finance intermediaries stay on top of the latest regulatory requirements and ensure they’re always compliant. Don’t let compliance issues derail your business – become a Marsh partner today!