This unit may have particular application in lending institutions prior to accepting loan applications received by those with minimal financial awareness especially the young, recent school leavers, unemployed, senior citizens and those from non-English speaking backgrounds.

ELEMENT

PERFORMANCE CRITERIA

1. Identify range and type of consumer credit options

1.1. The role of consumer credit is identified and advantages and disadvantages of credit are discussed with the client

1.2. Types of consumer credit facilities are explained to the client in plain language including the differences between unsecured and secured loans

1.3. Implications of default on secured loans are explained to the client

2. Identify and discuss costs of using credit

2.1. Fees and costs associated with different types of credit options and the features and associated risks of fixed versus variable interest rates are explained to the client

2.2. Ways to compare advertised interest rates and the effects of fees and charges are demonstrated to the client

3. Promote effective use of consumer credit

3.1. Ways to avoid excessive or unmanageable debt are discussed with the client in relation to their financial situation

3.2. Strategies to minimise fees on credit including the importance of meeting minimal payments on credit cards are discussed with the client

3.3. Ways to avoid credit card fraud are identified and communicated to the client

4. Provide client with information regarding credit reference reports

4.1. The role of credit reference agencies is discussed and explained to the client in plain language

4.2. The purpose and use of credit reference reports in assessing loan applications and the implications of establishing a poor credit history are emphasised and explained to the client

4.3. The right to access and methods of obtaining own credit reference report is explained, and relevant contact details provided to the client for follow up if required

Required skills

communication skills to:

clearly explain credit concepts to clients, using questioning and active listening as required and responding with empathy in sensitive cases

liaise with others, share information, listen and understand

use language and concepts appropriate to cultural differences

interpersonal skills to establish rapport with clients and remain impartial in discussing credit options

numeracy and IT skills to:

calculate credit and loan costs and repayments

access and use appropriate software such as spreadsheets and databases

access web-based information services

literacy skills for analysing information and credit products to ensure appropriateness to client needs, currency and accuracy

problem solving skills to identify any issues that have the potential to impact on the client's credit understanding and use and to develop options to resolve these issues when they arise

organisational skills, including the ability to plan and sequence work

Required knowledge

economic environment and its relationship to individual's credit and debt

principles of lending and credit

relevant industry codes of practice including:

Consumer Credit Code

Privacy Act

Credit Act

relevant State and Territory legislation regarding consumer credit issues and Judgement Debt Recovery Acts

roles and relationships between participants within the Australian financial services industry, including banks and other financial intermediaries

the range of consumer credit alternatives, products of relevant institutions, advantages and disadvantages of different credit options

The Evidence Guide provides advice on assessment and must be read in conjunction with the performance criteria, required skills and knowledge, range statement and the Assessment Guidelines for the Training Package.

Overview of assessment

Critical aspects for assessment and evidence required to demonstrate competency in this unit

Evidence of the ability to:

clearly explain the different types of consumer credit options currently available to clients and the associated implications and risks of the various credit schemes, as well as the implications of establishing a poor credit reference history.

Context of and specific resources for assessment

Assessment must ensure:

competency is demonstrated in the context of the financial services work environment and conditions specified in the range statement either in a relevant workplace or a closely simulated work environment

access to and the use of a range of common office equipment, technology, software and consumables

access to financial services product information

Method of assessment

A range of assessment methods should be used to assess practical skills and knowledge. The following examples, in combination, are appropriate for this unit:

evaluating an integrated activity which combines the elements of competency for the unit or a cluster of related units of competency

observing processes and procedures in workplaces or role plays

verbal or written questioning on underpinning knowledge and skills

setting and reviewing workplace projects and business simulations or scenarios.

Guidance information for assessment

The range statement relates to the unit of competency as a whole. It allows for different work environments and situations that may affect performance. Bold italicised wording, if used in the performance criteria, is detailed below. Essential operating conditions that may be present with training and assessment (depending on the work situation, needs of the candidate, accessibility of the item, and local industry and regional contexts) may also be included.

The role of consumer credit includes:

enabling approved applicants the ability to purchase items (goods or services) where the cost of the item exceeds current savings available.

Advantages and disadvantages of credit may include:

advantages:

can obtain and use purchased item immediately

minimises the need to carry cash or write cheques

allows for instalment payments on expensive items

convenient form of payment when travelling, especially overseas

disadvantages:

may increase cost of items purchased due to interest accrued

usually attracts other fees such as account servicing fees

can lead to compulsive buying habits

creates a false sense of wealth.

Consumer credit facilities may include:

fixed:

personal loans

lease

hire purchase

buy now, pay later schemes

revolving:

credit cards

store cards

overdraft.

Plain language refers to:

written or spoken forms of language easily understood by the listener, giving particular regard to the listener's characteristics including:

age

ethnicity

basic skills of comprehension

defining key terms and phrases, assuming little or no prior knowledge of the subject and may in some cases require the assistance of an interpreter.

Differences between unsecured and secured loans include:

a secured loan is supported by an underlying asset while an unsecured loan is not

unsecured loans attract a higher interest rate due to increased risk to the lending institution.

Implications of default on secured loans include:

repossession of the underlying asset by the lending institution

any shortfall in sale of repossessed asset against outstanding loan amount must be paid by borrower.

Fees and costs associated with different credit options may include:

account servicing fees

credit purchase fees

late payment fees

loan establishment fees

withdrawing from a foreign Automatic Teller Machine (ATM).

Ways to compare advertised interest rates may include:

informing the client of the comparison rate which includes all associated fees and charges.

Strategies to minimise fees on credit may include:

consolidating savings and credit facilities with the one institution where account servicing fees can be cancelled out

know how many free transactions come with the card

paying the minimum monthly instalment on time.

Ways to avoid credit card fraud include:

not disclosing Personal Identification Number (PIN) to anyone

selecting a PIN only the cardholder would know

signing the back of the credit card.

Implications of establishing poor credit history may include:

higher interest rate penalties

inability to obtain finance in the future

disadvantaged applications for rental accommodation

necessity to obtain guarantor in future loans.

Methods of obtaining own credit reference report may include:

writing, emailing or telephoning the relevant agency requesting a copy of one's own file, having provided relevant details to identify self

Unit sector

Credit management

This unit contains employability skills.