Loan Processing at Capital One Essay

This market effort, which was planned to take the form of a major unhorse drop, was designed to increase the book of account of funded imparts in about sixer weeks when potency guests start returning these applications. It was clear to e veryone at bully nonpargonil that the operations of give physical processing would play a major agency in determining if the upcoming mail drop would be a success.With 14 funded lends processed per bloke every month and a radical of 25 harmonizes on the team, the department does not buzz off the capacity to pronounce the application volume leading to our tar constitute of 700 funded loans per month that we set hobby our increased marketing effort, observed one of the managers engageing for deform, What we fill is a significant increase in staff. We alike need to to a great extent invest in culture technology to further increase the productiveness of the existing staff.While it was clear that the forecasted increase in loan applications would provide a serious challenge for the underwriters, there was no consensus on what actions should be taken. As was observed by one of the executives in hurry of consumer loans When I benchmark the productivity of our underwriting team with other companies in the industry, 14 funded loans per lad per month is not a number we can be proud of. It takes about 3 hours of actual work to fund a loan, and that includes everything from the initial interview to underwriting, quality inspection, and closing.We have 25 associates, that each whole shebang about 150 hours per month. So each associate should be fit to process 50 applications per month, which gives us 1250 applications per month for the team. Even if we fund alone every other loan that we underwrite, we would just need a subatomic bit of everywhere time to make for 700 units funded. Several others at enceinte nonpareil agreed. As it was put by one of the associates in eruption of plow marketing Frankl y, if you asked me, there seems to be a lot of potential for improving productivity in our processes.I am optimistic that our upcoming mail-drop leave alone lift productivity and utilization scores in the underwriting process since there will be a lot more work coming in. As the person in charge for operations management, Rick had mixed feelings about these comments. On the one hand, it was true that his departments productivity metrics had not been stellar in the past. But his associates worked very hard and were very capable. This case was developed solely as the base of operations for degree discussion.It is not intended to serve as an endorsement, source of special winding info or illustration of effective or ineffective management. on the whole entropy in the case has been disguised. Rick was relatively new to this role, though he was a highly accomplished operations manager with a history of taking on tough challenges and producing strong results by redirecting his t eams towards meliorate prioritization, teamwork and focus on strategically important activities. As he looked over the marketing forecast and the target of 700 funded loans for the next month, Rick wondered what the upcoming mail drop would do to his department?And, more importantly, what could he do to do crown One grow its consumer loan backing in the approximately optimal way? Capital One Background Information afterwards graduating first in class from the Stanford origin school in 1981, Richard Fair slang linked Strategic Planning Associates (SPA), a strategy-consulting firm. In 1986, Fair situate met Nigel Morris, a young associate at SPA. While analyzing the operations of a major money midway bank, the two reviewed the firms impute bankers bill operations. Both of them were infatuated by the enormous profitability relative to the rest of the bank.The young consultants concluded, recognise separate are not banking they are all about solicitation training on 200 Million people that youd neer meet, and, on the stern of that information, making a serial of decisions about bring money to them and then hoping they would pay you back. Fairbank and Morris recognized the potential of customizing credit learning ability products establish on characteristics and behavior of their customers and taking advantage of the technological advances in computers that offered companies the ability to record, organize and analyze large lists of customer data.They realized that fewer products in the credit card industry were being direct marketed and that level off fewer firms were fully exploiting the power of statistical analysis. Fairbank and Morris were able to convince the bank to run a test using this strategy. The test worked remarkably well, however, the bank was unwilling to adopt this new strategy. Convinced that they were onto something really big, the two flip their idea to more than 20 national retail banks before Virginia-based Signet sw an invited them to launch its Bank Card division.Over the next several long time, Fairbank and Morris ran thousands of statistical tests and eventually introduced the first balance transfer product in 1991 that revolutionized the credit card industry and saved a struggling Signet Bank. Four years later, in 1995, Signet spun off its credit card division to create the publicly held Capital One. Recognized for its innovation, customer service, information technology, and financial management, Capital One now is one of the largest issuers of Master Card and Visa credit cards in the world. Today, the caller-outs global customer base is blotto to 49 Million with managed loans totaling over $83 Billion.From its IPO in 1994 to 2005, Capital Ones stock price had increased more than 1400%. In recent years domestic diversification has become a patriarchal component of Capital Ones strategy. After going public, the company progressed on geographic and This case was developed solely as the ba sis for class discussion. It is not intended to serve as an endorsement, source of primary data or illustration of effective or ineffective management. entirely data in the case has been disguised. product line expansion done organic growth in credit cards and a series of sciences in non credit card businesses.In 1998, the company acquired Summit word sense Corporation, an auto loan provider. In 2001, it acquired the nations largest online provider of direct auto loans People First, and a leading provider of financing solutions Amerifee. The acquisition of Onyx Acceptance Corporation made Capital One Auto pay the second-largest independent auto lender in the United States. The company similarly acquired Kansas City-based eSmartloan, an online originator of home equity loans and mortgages Hfs Group, a home equity loan broker in the United Kingdom and InsLogic, an insurance brokerage based in Tennessee.A number of these diversified businesses along with some organically grown businesses reside in the Global Financial Services (GFS) validation of Capital One. The Loan processing center is one such business that supported a variety of loan products such as weakened business loans, Line of credits and Jumbo loans. The Loan Approval offset In the division in charge of consumer and small business loans, the marketing department solicits potential customers through direct mail and/or e-mail campaigns, that highlight the loan product features and specials of various products that are offered by Capital One.These campaigns, which are typically carried out at a nationwide level, have an information card that can be returned by the customer. The customer uses this card to provide information concerning their name, the type of loan they are elicited in and the phone number/time range that is best to reach them. Customers who resolve by sending this information back enter the process and are referred to as an App. Each App mensess through a process that consis ts of five go wonder, Workflow Coordination, Underwriting, Quality Assurance (QA) and Closing.Exhibit 1 shows the process flow with a brief description of the activities and the number of associates in each role. Interview The interview step consists of seven associates who call the telephone number undertake on the information card. On a typical day mingled with 200 and 500 potential customers are called depending on the incoming volume of customer requests. Federal privacy regulations require that financial institutions can speak about the loan only to the person who actually requested the loan. Hence, if this person is not home at the time of the call, the call has to be ingeminate at a later point.During the call, the associate interviews the applicant about her loan needs. Based on the customer needs, the associate offers a range of products to the customer and the loan terms such as the maximum loan amount and the interest rate associated with each product (usually a rang e of interest rates is provided). This case was developed solely as the basis for class discussion. It is not intended to serve as an endorsement, source of primary data or illustration of effective or ineffective management. All data in the case has been disguised.If the customer is interested in one of the products, she will start an application process with the associate. The associate follows a scripted questionnaire and enters the information being provided by the customer into a computer system. The interview associate sets the expectation with the customer on the next steps if additional information is necessary to complete processing and approving the application, an underwriter will get in touch with the customer in 2-5 business days to get the necessary information.If all the information is complete and accurate, the applicant will bugger off a phone call from an Underwriter in approximately 5-10 business days outlining the next steps in the closing process. Exhibit 2 sum marizes some sample data that was collected over the course of a week. The Exhibit shows it takes on average 22 to 24 minutes for an associate to process one extra app. This includes the time the associate spends talking with the applicant. It also includes the time it takes the associate to reach the applicant.