Turning a Profit in the Back Office

New business operates consumer-loan-processing function for small and midsize banks savings-and-loan institutions.

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Commercial banks and savings and loans are getting into the outsourcing act. Since it was founded by four bankers, in 1986, CLS Corp., in Blue Bell, Pa., has functioned as a back-office consumer-loan-processing arm for small and midsize banks and savings-and-loan institutions, which have typically focused more on commercial lending. "We see a trend in new companies beginning to specialize in and sell what have traditionally been forgotten or back-office operations -- like physician billing or employee-benefits processing," says Greg Case of APA/Fostin, a venture-capital firm based in Radnor, Pa., which has invested $1.4 million in CLS. "The idea is to increase the productivity and profit-making capacity of what until now have been looked on as cost centers." CLS handles all aspects of consumer lending, from loan applications to collection, from credit underwriting to customer service, for a fraction of what it would cost a bank to provide those services in-house. Despite the cost advantage, persuading banks to use CLS has been "a long education process," in the words of president Norm Bitterman. Last year, spurred by the signing of a $10-million, three-year contract with the Resolution Trust Corp. to manage its consumer-loan portfolios, CLS doubled its client base and tripled its revenues, to $6.5 million. It currently handles about $750 million in outstanding loans for 40 banks in nine states. Jeff Crabb, director of Resolution Trust's Phoenix office, says CLS is "tapping a potentially burgeoning market," in which there is still only a handful of players. "Banks have been outsourcing mortgage loans for quite some time, but doing it for consumer loans is still relatively new."

-- Alessandra Bianchi

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