Clarity provided on definition of a ‘co-manufacturer’

Clarification is being sought on whether motor dealer brokers could be considered co-manufacturers under the terms of Consumer Duty. The Finance & Leasing Association (FLA) has contacted the Financial Conduct Authority (FCA) for further information on how Consumer Duty will be applied in the motor finance market.

The FLA, alongside the National Franchised Dealers Association (NFDA), came together to indicate the types of situations in which there may be a lack of clarity over whether a broker may be considered a co-manufacturer.

In response, the FCA said: “generally speaking, the extent of a firm’s responsibility under the Consumer Duty will depend on the nature of its role in the overall arrangements for the provision of the relevant product or service to retail customers.”

The authority detailed that the starting consideration for a firm should be ‘whether it is in a position to determine or materially influence the manufacture of a product or service.’

It is outlined by the FCA that this may include:

  • Contractual terms the firm proposes, accepts, or endorses, when dealing or negotiating with other participants in a distribution chain, insofar as those terms may affect retail customer outcomes
  • Material influence over the setting of commission levels, or other parameters, where they affect the price and value of the product or service.

The regulator also specified that ‘where an intermediary firm (for example, a broker) is able to make significant decisions about, or changes to, important aspects of a product, for example the cost to the end customer or the application of any significant terms and conditions, it will likely be a co-manufacturer for the purposes of the Consumer Duty’.

The response also confirmed that it is possible for a firm to be both a co-manufacturer and a distributor.

The letter detailed that where firms collaborate in a co-manufacturing agreement, they must outline their respective duties in a written agreement. This is to ensure clear accountability where firms divide or share responsibilities for compliance.

Finally, the FCA outlined that where firms remained in doubt as to the application of Consumer Duty, they are able to submit a formal request for individual guidance to the FCA, pursuant to Chapter 9 of their Supervision Manual (SUP 9).

Members should consider whether this information impacts their view on whether they may be considered as a co-manufacturer.

Questions can be submitted to the BVRLA via [email protected]