intermediate credit trainers notes - citizens advice resources/financial... · ©2015 citizens...

Intermediate Credit Guidance for conversation on credit

Trainers Notes for intermediate credit with clients

2 ©2015 Citizens Advice Intermediate credit trainer notes/July17/v3

Citizens Advice financial capability

This session pack has been produced as part of Citizens Advice Financial Skills for Life.

Copyright © 2015 Citizens Advice All rights reserved. Any reproduction of part or all of the contents in any form is prohibited except with the express written permission of Citizens Advice. Citizens Advice is an operating name of the National Association of Citizens Advice Bureaux, Charity registration number 279057, VAT number 726020276, Company Limited by Guarantee, Registered number 1436945 England. Registered office: Citizens Advice, 3rd Floor North, 200 Aldersgate Street, London, EC1A 4HD

Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, Citizens Advice assumes no responsibility. The user of the information agrees that the information is subject to change without notice. To the extent permitted by law, Citizens Advice excludes all liability for any claim, loss, demands or damages of any kind whatsoever (whether such claims, loss, demands or damages were foreseeable, known or otherwise) arising out of or in connection with the drafting, accuracy and/or its interpretation, including without limitation, indirect or consequential loss or damage and whether arising in tort (including negligence), contract or otherwise.



Intermediate credit The aim of this session is to help advisers to provide a session to clients that introduces detailed concepts and language about credit. This session is specifically aimed at those clients who already have some knowledge when it comes to credit, and as such introduces more detailed calculations, concepts and tips. Objectives are that by the end of this session clients will be able to:

• Understand APR reasonably well

• Understand different types of credit

• Grasp the basics of credit checks and ratings

• Be able to apply APR rates to loans with some degree of accuracy

• Distinguish and understand different types of jargon. General guidance notes on delivering a group financial capability session are available elsewhere on the Citizens Advice website. These notes are for the trainers use only. A separate handout pack should be used with every client in the group, which will include signposts for further information and guidance.

Trainers are encouraged to feedback to the Financial Skills for Life team with any feedback about training materials or resources. If you have any comments, please contact: [email protected]

mailto:[email protected]



Contents

Session Specific Guidance 5

Lesson Plan 7

1. APRs explained 8

2. Car payment methods 9

3. Contract Language factsheet 10

4. Credit Check factsheet 11

5. Matching loans to definitions 12

6. Credit language factsheet 14

7. Real cost of borrowing 15

8. APR cheat sheet table 16

9. Store card factsheet 17

Evaluation Guidance 18

Trainers notes 20



Session specific guidance Subject information Trainers do not need to have specialist money advice knowledge or experience but must have a basic understanding of the different sources of credit, how to compare costs of credit and be able to signpost learners to sources of further advice and information. The pack contains all the key information for the topics covered. Any additional information that is given should be taken from an up to date and accurate source such as:

• the money management section of www.adviceguide.org.uk

• the Money Advice Service free leaflets at www.moneyadviceservice.org.uk including ‘borrowing money’, ‘credit cards’ and ‘credit unions’

This session aims to help learners make informed choices about borrowing, not to give money or debt advice. For this learners should be referred to their local Citizens Advice or other advice agency. Materials

• Blank flip chart paper • Marker pens • Note paper and pens for learners • Blu tack • Calculators • Prepared cut-outs for word-matching activity

Manage expectations – Make it clear to clients that the session is a brief overview of choosing credit, and the most essential elements of financial capability that relate to it. As a one-off session, there will not be the time to explore any single element in any great detail. Signpost and empower – Ensure that clients are aware that after the session they will have a clear idea where to go to answer outstanding queries and to get further assistance. Pacing – Due to the length of the session, it is recommended to allow at least one break for the clients. Be aware of this when planning total timings for sessions.

http://www.adviceguide.org.uk/

http://www.moneyadviceservice.org.uk/



Top Tips



Lesson Plan Red activities – Are essential to any session on this topic Amber activities – Are highly recommended but not essential Green activities – Are optional activities, if time allows The size of the bubble indicates roughly how much time, relative to the session, to spend on an activity.

This session is intended to take about 60 minutes to deliver. Activities 3, 4, 6 and 9 are all conversational discussions over specific factsheets; as such, the adviser can choose just to provide factsheets at the end of the session instead

1

2 3

6 7

4

5

8 9

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Cap

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: 1

– E

(a) 3

2

– E

(g) 3

3

– B

(h) 2

4

– E

(a) 3

5

– E

(d) 3

6

– E

(d) 3

7

– E

(f) 2

8

– E

(a) 3

9

– D

(a) 3



Activity: APRs explained

Using handout CC1, reassure the clients that the official APR calculation is, like many things to do with banks, intimidating but actually very straightforward. APR can, very roughly, be calculated as the amount of money one has to repay in a year after borrowing the initial sum. For example:

- Borrowing £100 at 20% APR means repaying £20 on top of the original £100 after one year, meaning £120 total.

- Borrowing £100 at 90% APR means repaying £90 on top of the original £100 after one year, meaning £190 total.

When providing answers to clients, keep referring to this approach. Answers

Barclays Credit card 18.9% So for every £10, £1.89 interest is payable. John Lewis Credit Card 16.9% So for every £10, £1.69 interest is payable. Argos Store Card 29.9% So for every £10, £2.99 interest is payable. QuickQuid 819.12% So for every £10, £81.91 interest is payable. Wonga 4214% So for every £10, £421.40 interest is payable. Loan Shark 131,000% (estimated) So for every £10, £13,100 interest is payable.

If this was useful, why not try… Credit – Detailed APR factsheet Credit – Store cards

AIC 20 – C



Factsheet: Car payment methods

Advisers should use this activity to discuss different methods of car payments. The advantages and disadvantages should provide enough material for a conversation with clients.

The handout is a factsheet and although it is useful as something for a client to take away with them, we would recommend that they also take part in one of the APR activities with the adviser if possible.

If this was useful, why not try…

Credit – Types of loan basic factsheet Credit – Finance types – basic factsheet

AIC 20 – C



Factsheet: Contract language

This activity is a conversational activity, and relies on the adviser to discuss the salient points of factsheet CC3 with the client. Further information and guidance can be found elsewhere among the Citizens Advice resources, or on other websites online, if the client wishes to continue learning about the topic.

AIC 20 – C W



Factsheet: Credit check

This activity is a conversational activity, and relies on the adviser to discuss the salient points of factsheet CC4 with the client. Note – Noddle is provided by Callcredit, and Clearscore is provided by Equifax Further information and guidance can be found elsewhere among the Citizens Advice resources, or on other websites online, if the client wishes to continue learning about the topic.

AIC 20 – C



Activity: Matching loans to definitions

This exercise is intended to stimulate debate about both types of credit and their respective advantages/disadvantages. The adviser needs to print and cut out the cards on the following page and provide clients with handout CC5. These can then be given to the client, feel free to discuss them as they are given out if it would be of value, and the client is asked to try to match them up to the definitions on the second handout. The first one is done for the client already. The final handout is a completed sheet of answers for the clients reference and to take away. Throughout the exercise, there should be regular points when the adviser can engage in wider discussion as needed by the client. Trainer notes A key point to make is that this information is to help give a general idea about the different advantages and disadvantages that might apply to different types of borrowing but the detail should always be checked with the particular lender as these things can vary from one lender to another and change significantly over time.


Credit – Credit report exercise Credit – Buy as you view exercise

AIC 20 – C



Which loan? - Copy the cards and cut out

Overdraft

Store card

Credit card

Credit union loan

Door step lender

Unlicensed money lender (Loan shark)

Payday loan

Catalogue

Friends



Factsheet: Credit language


AIC 20 – A C



Activity: Real cost of borrowing

This activity should provide more real grounding of APR and loans. The client will need to try to answer the points in handout CC7 themselves. Answers are provided below. 1 year 3 years 5 years The trainer can then raise the question of other potential fees on top of interest. These can be: • an arrangement fee • an early redemption fee • higher priced goods • a late payment charge • payment protection insurance (PPI)

A final basic factsheet is provided as well.

If this was of use, why not try…

Providing the APR Cheat Sheet table

£1126 £1078

Store card Credit Union

£1398

£1231

£1675

£1385

AIC 20 – C



Activity: APR Cheat Sheet Table

Clients can use this table to see how much they will actually pay back (to the nearest pound) when they take out credit and repay in equal monthly instalments. Find the APR on the left hand side and follow it across to the number of years of the loan. For example if you borrow £1000 at an APR of 25% for 5 years you’ll pay back £1675, that’s an extra £675 in interest. This table assumes that the only charge in the agreement is interest. Other activities cover other charges that may be applied. The handout is for the client’s reference and referral, they should be encouraged to take it home and keep it safe.


Credit – Detailed APR factsheet Credit – Store cards

AIC 20 – C



Factsheet: Store cards


AIC 20 – C

Evaluation Guidance Areas that underpin client financial capability These are the Citizens Advice Financial Capability Areas that were carefully researched and developed by The Impact Team at Citizens Advice to help local offices measure client financial capability robustly and consistently across services. They were developed in line with the MAS UK Financial Capability Strategy Adult Outcomes Framework. Sample questions and scales can be found overleaf. An Impact Tool is available in Petra for recording responses and progress.

Keeping track of money Controlled spending

◉ Keep track of money going out, money coming in and calculate what's left over. ◉ Check my current balance and keep my papers in order.

◉ Spend or save only what I can afford after covering the basics I need to live, like food, housing and electricity.

Having enough money to live Planning ahead with money

◉ Have enough money to cover the basics I need to live like food, housing and electricity.

◉ Know when my bills and payments are due and keep on top of priority bills, like for electricity, loans and council tax. ◉ Put some money aside for big or unexpected costs.

Looking for the best deals Staying informed about money services

◉ Look at different options and buying the best deal for things like food, clothes, large items or services like phone, electricity or insurance. ◉ Get different opinions on what I am buying, like from reviews and comparison websites.

◉ Read the main information about money services I get like banking, benefits and loans. ◉ Stay on top of changes to these or get help when I don’t understand.

Mindset

◉ Confidence about taking action on my money matters.

Copyright © 2015 Citizens Advice All rights reserved. Any reproduction of part or all of the contents in any form is prohibited except with the express written permission of Citizens Advice. Please note these areas, questions and scales are owned by Citizens Advice and subject to copyright restrictions so reproduction must include the relevant copyright statement above and no changes to its wording, response categories or layout must be made. For further information please contact Satdeep Grewal on [email protected] or 03000 231 608.


Sample questions and scales for measuring client financial capability These questions can be used to ascertain how good someone’s financial capability is and so, what their level of need is. They also allow you to track progress by being used to follow-up with how someone is getting on after you have helped them.

Score 1 to 3 Score 4 Score 5 to 7

Low financial capability Average financial capability Advanced financial capability

High need Medium need Low need

Keeping track of money ◉ Calculate money going out, money coming in and what's left over. ◉ Check my current balance and keep my papers in order. Rate your knowledge about the above

No knowledge

No to some knowledge

Some knowledge

Some to good

knowledge

Good knowledge

Good to excellent knowledge

Excellent knowledge

Don’t know

1 2 3 4 5 6 7 ▢

How often do you do the above?

Never Never to sometimes

Sometimes

Sometimes to often

Often

Often to very often

Very often

Don’t know

1 2 3 4 5 6 7 ▢

Staying informed about money services ◉ Read the main information about money services I get like banking, benefits and loans. ◉ Stay on top of changes to these or get help when I don’t understand. Rate your knowledge about the above:

No knowledge

No to some knowledge

Some knowledge

Some to good

knowledge

Good knowledge

Good to excellent knowledge

Excellent knowledge

Don’t know

1 2 3 4 5 6 7 ▢

How often do you do the above?

Never Never to sometimes

Sometimes

Sometimes to often

Often

Often to very often

Very often

Don’t know

1 2 3 4 5 6 7 ▢

Mindset How much confidence do you have about taking action on your money matters?

No confidence

No to some confidence

Some confidence

Some to good confidence

Good confidence

Good to high confidence

High confidence

Don’t know

1 2 3 4 5 6 7 ▢

Copyright © 2015 Citizens Advice All rights reserved. Any reproduction of part or all of the contents in any form is prohibited except with the express written permission of Citizens Advice. Please note these areas, questions and scales are owned by Citizens Advice and subject to copyright restrictions so reproduction must include the relevant copyright statement above and no changes to its wording, response categories or layout must be made. For further information please contact Satdeep Grewal on [email protected] or 03000 231 608.




Trainers notes

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