Consumer direct lender E-Loan is getting in the middle of a hot political and economic debate: outsourcing, is it good or bad for the American economy?
E-Loan decided to let its customers choose whether they want their home equity loans processed in India or the U.S. So far, about 86 percent of those borrowers chose to ship their loans overseas for speedier service.
Lenders are looking at India as a way to stay competitive in anticipation of a shrinking mortgage refinance market. Call centers in India offer an opportunity to cut costs and speed up loan processes.
Home equity loans processed in India close two days faster than those that stay in the U.S., according to E-Loan, which provides mortgage, auto, credit card, home equity and business loans exclusively over the Internet.
But E-Loan CEO Chris Larsen said the program isn’t just about efficiency. The initiative has a lot to do with disclosing the practice of outsourcing to consumers and allowing them to decide for themselves.
“Some companies are actually going out of their way to deceive (consumers) about outsourcing,” Larsen said.
Indeed many lenders have kept their outsourcing plans and practices quiet while the topic of sending jobs overseas has incited heavy political debate. Larsen believes those companies that try to hide the fact that they are outsourcing certain processes and functions only contribute to the negative backlash associated with the trend.
The fact that 14 percent of E-Loan’s home equity borrowers decided not to participate in outsourcing shows that when given the choice, some people would rather keep their loan information inside the U.S.
Critics of outsourcing say the practice raises concern over consumer privacy since their personal data is being sent to foreign countries that often don’t have any privacy laws in place. Larsen, a longtime advocate for stricter consumer privacy laws, addressed that concern by pointing out the strengths in its outsourcing partner, Wipro.
“If you use a good outsourcing partner, in my judgment there is no difference in privacy protections in the U.S. and those with outsourcing,” he said.
According to E-Loan, its outsourcing partner is bound by strict privacy and security standards, which include the prohibition of selling, sharing or retaining customer information. The lender promises an encrypted connection and internationally recognized information security standard are in place to provide the highest level of security.
E-Loan’s pilot outsourcing program launched in early February. It currently has the capacity to process 25 percent of the lender’s home equity applications. Parts of the loan process that are outsourced include back office functions, underwriting and funding functions, among others.
Certain customer callback functions remain in the U.S., Larsen said, because the lender believes these parts of the loan process are better suited here.
Larsen noted the reason loans close faster when outsourced is because the company can utilize the 24-hour time clock. There’s about a 12-hour time difference between the U.S. and India, and that enables outsourced loans to be processed while American workers are sleeping.
“It’s certainly not that Indian workers are any faster than American workers. Both sides are working very hard,” he said.
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