June 28, 2018 / 10:01 AM / 5 months ago

Mulvaney-led U.S. CFPB slashes payday lender penalty -sources

    By Patrick Rucker
    WASHINGTON, June 28 (Reuters) - Mick Mulvaney, head of the
U.S. Consumer Financial Protection Bureau, cut in half a fine
that his Obama-era predecessor sought against a payday lender
and dropped some of the agency's earlier claims in the case,
three people familiar the matter told Reuters.
    Mulvaney, appointed by President Donald Trump, has vowed to
dial back what he says is overreach by the independent agency,
which was created following the 2007-2009 financial crisis to
stamp out predatory lending.
    The CFPB fined South Carolina-based lender Security Finance
$5 million on June 13 for harassing borrowers when collecting
debt and mishandling credit report data. 
    Richard Cordray, Mulvaney's predecessor, had wanted to seek
additional charges against the company for pushing borrowers to
buy personal insurance that was bundled into loans.
    Cordray wanted Security Finance to pay $11 million, with $3
million as a penalty for the debt collection and credit
reporting abuses and at least $8 million to compensate consumers
who felt pushed into insurance, the sources said.
    Mulvaney dropped the insurance claims, meaning the
settlement with Security Finance leaves no money for customers
Cordray wanted to remediate. Reuters reported in March that
Mulvaney was reviewing the case.             
    "We are agreeing to this settlement to close the matter and
move forward in serving our customers," said Security Finance
chief Susan Bridges in a statement. The company declined to
comment on its insurance business.
    John Czwartacki, spokesman for the CFPB, said the agency's
claims in the consent order were based on what was supported by
evidence. 
    "The enforcement arms of government should not be used in
order to shake down the productive sector just because we can,
especially when the legal case is shaky at best," he said. 
    The CFPB has prevailed in many cases involving add-on
products in the past and the industry will be watching to see if
Mulvaney is pulling back from such cases, said Christopher
Peterson, a former CFPB attorney. 
    "The CFPB's job is to deter illegal activity, not look the
other way," said Peterson, who now teaches at the University of
Utah. "If the agency eases up, industry will notice." 
    Mulvaney has also dropped several cases begun by Cordray,
Reuters has reported. The Security Finance penalty was only the
second in Mulvaney's seven months leading the bureau, following
a record $1 billion fine against Wells Fargo & Co         for
auto insurance and mortgage lending abuses.             
    Security Finance routinely charges triple-digit interest on
short-term loans and sent collection agents to 1.3 million
customers at home and at work, threatening and in some cases
physically assaulting borrowers, according to the CFPB
settlement.
    Security Finance also delivered millions of faulty reports
to credit bureaus, CFPB determined. In its settlement, Security
Finance promised it would keep accurate records for the credit
bureaus.

 (Reporting By Patrick Rucker; Editing by Michelle Price and
Meredith Mazzilli)
  
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