U.S. consumer watchdog fines debt collector, drops customer payouts

WASHINGTON, July 13 (Reuters) - U.S. consumer watchdog chief Mick Mulvaney ordered that a debt collector and its former chief executive be fined $800,000 for harassing customers, but he dropped $60 million in customer payouts that his Obama-era predecessor had sought, according to three people familiar with the decision.

Mulvaney has vowed to rein in what he says is overreach by the Consumer Financial Protection Bureau (CFPB), which was created following the 2007-2009 financial crisis to combat predatory lending.

The settlement, announced on Friday, is at least the second in which Mulvaney, who was appointed head of the bureau in November, has dropped consumer payouts from cases under his review.

The CFPB said in a statement it had fined Kansas-based National Credit Adjustors (NCA) and Bradley Hochstein $500,000 and $300,000, respectively, for wrongly hounding borrowers over debt they owed to payday lenders. But Mulvaney, who is also White House budget chief, decided not to seek $60 million in restitution and debt forgiveness that his predecessor, Richard Cordray, had wanted, said the three people, who are familiar with the settlement discussions.

In a statement, the bureau said NCA and its partners had violated federal fair debt collection statutes, but a Mulvaney spokesman did not immediately comment on why the bureau dropped payouts to wronged customers.

Mulvaney weakened the penalty even though he agreed with Cordray that NCA profited from strong-arm collection tactics.

NCA uses third-party agents to collect debts on payday loans and can be held responsible when those companies break the law.

Between 2011 and 2016, NCA handed roughly 80,000 accounts to outside agents that collected tens of millions of dollars for NCA, the CFPB consent order shows. These agents routinely impersonated law-enforcement officers, threatened borrowers with lawsuits or arrest, and tried to collect more money than was due, the agency found.

In a statement, NCA said it was pleased with the agreement and that it would demand that its partner companies comply with the law. (Reporting By Patrick Rucker; Editing by Michelle Price and Steve Orlofsky)