Loan Processing at Capital One

It was in late July $2004$ and Rick Weis, operations manager of the loan processing center

at Capital One, was looking over the marketing forecast for the upcoming quarter.

Following several months during which Capital One had funded significantly fewer loans

than targeted, Capital One$$s marketing team was now planning for a significant direct

marketing effort. This marketing effort, which was planned to take the form of a major

mail drop, was designed to increase the volume of funded loans in about six weeks when

potential customers start returning these applications.

It was clear to everyone at Capital One that the operations of loan processing would play

a major role in determining if the upcoming mail drop would be a success. $$With $14$

funded loans processed per associate every month and a total of $25$ associates on the

team, the department does not have the capacity to handle the application volume leading

to our target of $700$ funded loans per month that we set following our increased

marketing effort$,$ observed one of the managers working for Rick, $$What we need is a

significant increase in staff. We also need to heavily invest in information technology to

further increase the productivity 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 charge of consumer loans: $$When I

benchmark the productivity of our underwriting team with other companies in the

industry, $14$ funded loans per associate 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