Certificate IV in Credit Management Assignment
CIVCMv1 Project
This project contains three tasks. Complete all tasks.
Project tasks -
Topic 1 - Developing self-management skills and professional knowledge
Task 1.1 - Identifying primary loan products
Identify the primary loan products that are managed by your team or offered by your organisation.
List three (3) commonly offered products below and their key characteristics, such as interest rates and optional facilities.
Research and consider what features differentiate the products you have listed from similar products offered by other lending organisations.
The websites below or those of other lending organisations will provide information about a range of loan products and their features. Research these sites to identify similar products to the ones you have listed and their features.
If you are not currently employed in the industry, select and compare the products of lenders listed below or others.
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ANZ
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Westpac
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St. George Bank
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National Australia Bank
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Commonwealth Bank
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Aussie Home Loans
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RAMS Home Loans
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Task 1.2 - Identifying legislation
1. The National Consumer Credit Protection Act 2009 (Cth) (NCCP Act) which includes the National Credit Code (NCC) is important to the regulation of consumer credit in Australia.
(a) List three (3) key features imposed by the consumer lending regulatory system with regard to lending decisions. (100 words)
(b) Briefly explain the concept of 'responsible lending' under the NCC. (100 words).
2. List one (1) other legislative Act, apart from the NCCP Act, that is relevant to the credit and lending industry and briefly discuss its impact on the lending process. (100 words)
Task 1.3 - Planning your personal development - Action plan
Complete the template below to:
- assess your current situation
- identify future goals
- determine how to achieve those goals, both in the short term and in the long term.
By working through the steps in the template you will build a personal development action plan.
It is suggested that you complete the plan as you work through the course. In doing so, issues may be highlighted for attention which are not apparent or obvious at the moment. (300 words)
Factors to consider when preparing your development plan
1. Assess your current work
Examine sources of information about the requirements of your current position. For example:
- job description
- key performance indicators (KPIs)
- objectives
- general work competencies.
2. Assess your current performance
Identify any gaps in your competencies, skills, abilities and knowledge by looking at:
- outcomes of performance review
- feedback from others
- your self-assessment.
3. Consider your future work and life
List your values and goals:
Ask yourself what sort of work you want to do in the future.
Determine the skills and knowledge needed for this work.
Think about your personal goals and values - what sort of future do you visualise for yourself?
4. Your future performance
Identify the gap between your current situation and what you need to do to achieve your goals:
What further education and training will you need?
Who would be a valuable mentor to you?
What networking opportunities would assist you?
Now that you have worked through the plan, you will probably have some long-term goals and action points, and some short-term ones.
Some of your major long-term goals may need to be broken up into smaller sub-goals. Follow these steps:
- Consider your long-term and your short-term goals and plans.
- Consider the Pareto Principle - what possible actions will have the greatest results?
- List the three (3) most important issues that you need to address.
- Decide how you will address the issues identified above and put a time frame against each of these.
Task 1.4 - Analysing work tasks
1. List the work tasks you perform on a daily basis. (100 words)
2. Assess each task in terms of the dimensions and models discussed in the topic specifically, in terms of:
- efficiency
- competency to complete the task
- focus and relevance of the task
- systems and tools available to complete the task.
Identify tasks where there are opportunities for improvement. (75 words)
3. List the tasks you have identified as having scope for improvement in the way they are carried out. Explain how you can improve the way these tasks are completed. (150 words)
Topic 2 - Evaluating and processing the credit application
Case study: Evaluating and processing a loan application
Read the following case study then answer the questions that follow.
Background
Daniel and Catherine Morrison have been married for three years. They have no dependants.
They rent their current address and want to buy an apartment in one of the outer suburbs.
Daniel is a self-employed plumber. The business structure is a partnership with Catherine, who assists with bookkeeping and invoicing in the business. He has established contacts with a number of building companies which provides him with much of his work. He also advertises locally and fills any excess time with small plumbing jobs.
He has been self-employed for eight years.
Catherine works for a large catering firm.
The cost of the apartment they want to buy is $395,000.
They have saved $100,000 and will receive a gift of $50,000 from Catherine's parents to assist in purchasing the property.
Additional purchase and borrowing costs are estimated to be about $25,000.
Although Daniel and Catherine have accounts with Big Bank and West Bank, respectively, they have chosen to go to your organisation for their home loan.
The property is vacant at the moment. It has a large double garage which Daniel can use to store plumbing supplies. He has checked with the owners' corporation and they will allow him to use it for this purpose.
The selling agent is Vandyke and Hudson, 19 Valley Way, My Town. They hold the keys to the property. They also hold a deposit from Daniel and Catherine of $39,500.
The vendors are Peter and Denise Jago.
Task 2.1 - Verifying information
1. Do these applicants have to verify their identities with your organisation? If so, explain why this is necessary and how they can do it. (75 words)
2. Explain how you would verify the following information supplied by the applicants: address, employment and income, dates of birth, and credit history. (100 words)
3. How would you verify the equity they intend to contribute to the purchase? What should you be on the lookout for regarding the applicants' contribution? (75 words)
4. What other information might you need and how would you verify it, if necessary? (75 words)
Task 2.2 - Assessing against the five 'Cs' of lending
Further information
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Cost of property
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$395,000
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Purchasing and lending costs
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$25,000
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Applicants' total contribution
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$150,000
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Loan sought
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$270,000
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They are seeking a loan term of 30 years.
The monthly repayments on such a loan will be $1796.00
Apart from the rent they currently pay (which will cease once they move into their own home), and costs associated with maintaining the new home, the applicants have no other ongoing financial commitments.
Note: For the purposes of this assignment, ignore the possibility that the applicants might benefit from any government subsidies or allowances due to it being their first home purchase.
1. Character
Given the information presented in the case study and dependent on verification of information, what comments would you make about the 'character' of the applicants, Daniel and Catherine?
What is your conclusion about the applicants' character? (200 words)
2. Capacity
Using the 'income percentage method', calculate the applicants' capacity to repay the loan. What will their commitment level be if the loan is approved? Applying generally accepted limits, is this level acceptable? (100 words)
3. Capital
Assuming the valuation placed on the property is $395,000, calculate the loan to valuation ratio (LVR).
What comments would you make about the LVR in relation to general lending requirements and these applicants? (75 words)
4. Collateral
Given the information presented so far, how would this loan be best secured?
Is the security sufficient from the lender's point of view? Why/why not? (75 words)
5. Conditions
Using the information presented so far, identify any 'conditions' that might impact on this loan application. (100 words)
Task 2.3 - Negotiating conditions with the applicants
Further information
The valuer's report has been received and it places a value of $395,000 on the property which is the same as the purchase price.
The loan has been reviewed by your credit manager who has added the following conditions to the loan approval, which comply with your organisation's guidelines:
- The term of the loan will be 20 years instead of 30. This will allow the applicants to take advantage of their current, relatively high capacity to repay, thereby allowing the loan to be paid off more quickly. This is desirable from the lender's perspective due to Daniel being self-employed and his income subject to variation, and to a predicted downturn in the building industry which may affect all trades.
- The applicants are to provide income and expenses statements for the partnership to the bank on a six monthly basis in order to monitor income levels and loan serviceability.
You write to Daniel and Catherine advising them of the above conditions. Catherine phones you to say they accept the requirement to provide six monthly income and expenses statements, however, they want at least a 25-year loan term.
What would you say to her to persuade her that a 20-year term is preferable? (100 words)
Task 2.4 - Gaining the applicants' acceptance of the loan offer
1. Both applicants have now verbally agreed to accept the additional conditions attached to the loan. What should now be done to obtain the applicants' formal acceptance? (100 words)
2. What are the key issues that you should keep in mind at this stage? (100 words)
3. What should you typically check once you have received their acceptance? (100 words)
Task 2.5 - Establishing the loan and disbursing funds
Further information
You have now received a copy of the letter of offer signed by the applicants. You have checked that all items in the letter, including signatures, are correct.
The applicants have indicated that they wish to open an account with your organisation from which monthly loan repayments will be deducted.
Settlement is set to take place in four weeks time.
Instructions for disbursement of funds as follows:
Cheque for $270,000 made out to Peter and Denise Jago
The loan can now proceed to the establishment and settlement stage.
In general terms, and without needing to specifically reference the case study, what steps and checks will need to be taken to settle the application and debt arrangement? (250 words)
Topic 3 - Providing service and resolving problems
Task 3.1 - Identifying and improving client service standards
1. Think about your job role and the tasks you perform on a routine basis. Consider how they impact on your organisation's clients.
(a) List at least three (3) of the tasks you perform below and describe how they impact on the client. (150 words)
(b) Describe the standards of performance required by your organisation when you carry out the tasks identified above. (150 words)
(c) Explain the monitoring that takes place (or could take place) to determine if the standards of performance are being met. (150)
2. Identify at least one (1) task you (or a colleague) perform on a routine basis that is monitored by the organisation and could be improved in some way.
(a) Describe the task. (75 words)
(b) Explain how it might be improved and how the improvement would benefit the client. (150 words)
3. Note: The following activity may require that you carry out research within your organisation, beyond your immediate work area.
(a) Identify one (1) of your organisation's client segments. (75 words)
(b) Identify the data that the organisation collects on this client segment. (150 words)
(c) How is (or could) this data used to improve the service delivered to clients in the identified segment? (150 words)
(d) What additional data (or ways of using existing data) can you identify to further improve service offered to clients in this market segment? (150 words)
4. There are a variety of client groups who have special needs of some sort. These needs might involve language, ethnic origin, socio-economic considerations, and geographic location, etc.
(a) Identify one (1) of your organisation's client groups which has a special need or needs. Describe the need or needs of this group. (75 words)
(b) Describe how your organisation has adapted its processes or procedures to cater for the need or needs of the group identified above. (150 words)
Task 3.2 - Resolving client complaints
Read the following scenarios and then answer the questions that follow.
1. Scenario 1
You have taken a call from a Rajeet, a client, complaining because he has received his latest loan statement and has noted that the interest rate has increased by 0.25%.
Rajeet claims he was promised his rate would not increase for at least 12 months and he is only six months into the loan.
You investigate and find that the rate rise is in line with a recent general interest rate rise.
You cannot find a record of an agreement with the client to keep their rate unchanged for 12 months.
Rajeet is upset and unhappy.
(a) What communication and interpersonal skills might you use at this stage of the interaction with Rajeet? (75 words)
(b) Bearing in mind your organisation's relevant policy and procedures with regard to complaints and disputes:
- What action would you now take?
- What would you say to Rajeet?
- What will happen as a result of his complaint and what are his options if he is dissatisfied with the response from your organisation? (200 words)
2. Scenario 2
You are processing a loan application for Jenny Jamison. The application is in its final stages and everything should be in order; however, you notice that guarantor documentation has not been correctly executed. Specifically, there is no statement from an appropriate person, such as an accountant or solicitor, confirming the implications of providing a guarantee have been explained to the guarantor and that they appear to understand.
You call Jenny Jamison and explain the situation, requesting that the appropriate documentation be provided.
Ms Jamison is angry. She says that the loan money is needed now and that nothing was said about the need for the additional documentation when the application documentation was lodged. She demands that the application be finalised immediately without the additional documentation.
You cannot comply with her request as it would breach your organisation's policy and procedures, as well as relevant regulatory codes.
(a) Describe and explain the techniques and strategies you would use to achieve a satisfactory resolution. (250 words)
Task 3.3 - Dealing with loan defaults
1. The National Credit Code (NCC) sets out certain events that must occur and steps that must be followed by the creditor in the case of default. Briefly explain those events and steps. (150 words)
2. Read the following scenario and then answer the question that follows.
Your organisation has identified an account which is significantly in default. Initial contact with the client has failed to reach a satisfactory resolution. The loan is covered by the NCC.
In the course of investigating the default, it has been discovered that the client provided forged evidence of employment and income to support their loan application.
Do the events and steps identified in the previous question (1) apply in the situation described in this question? Explain why/why not. (75 words)
Task 3.4 - Initiating legal action
Read the following scenario and then answer the question that follows.
A debtor in default has been issued with a notice of demand. They have not responded and all attempts to contact the client and reach a satisfactory resolution have failed.
The creditor has decided to take legal action to recover the debt.
Describe the typical process that would now be put in place to recover the debt (i.e. describe the steps involved). (100 words)
Task 3.5 - Promoting the effective use of credit
Read the following scenario and then answer the questions that follow.
Natalie is a single parent. She is returning to the workforce after a period looking after her young child. Because of the location of her new employment, she needs to buy a car for transport.
In the past her former partner managed all the household finances, but now she has to make the decision about how to finance the purchase of the car. She has insufficient funds to buy it outright.
Natalie comes to you for advice on credit and the best way to finance the purchase of the car. It is likely to cost about $15,000. She would prefer to obtain finance for the whole amount. Assume that her income will be sufficient to cover necessary repayments.
1. What communication skills might you use to establish and confirm Natalie's level of knowledge about credit and finance and to establish her needs? (100 words)
2. What type of credit options would you suggest to Natalie and why?
Your answer should include a comparison of two (2) credit options and a recommendation of one (1) option with reasons for the recommendation. (150 words)
3. Provide a simple explanation for Natalie of the difference between a secured loan and an unsecured loan with respect to her needs. Include in your explanation the implications of taking out a secured loan? (150 words)
4. Provide Natalie with a summary of potential fees and charges that might be applicable to the credit option you have suggested? (150 words)
5. Explain to Natalie how she can compare the real cost of loans offered by different credit providers. Include an explanation of why your suggestion is likely to provide an indication of the real cost. (75 words)
6. What would you say to Natalie about the records kept by credit reporting agencies, their use and her rights regarding her access to the information held? (100 words)
7. What information and advice would you give Natalie about her plan? (100 words)
8. Overall, what advice would you give Natalie about the debts she intends to undertake and the possibility that she might default on her obligations? (100 words)
Attachment:- Assignment File.rar