WFC Wells Fargo and Company

By Lalita Clozel 

WASHINGTON -- The Consumer Financial Protection Bureau on Wednesday fined a debt collector $5 million, the first fine levied by the bureau since the record $1 billion penalty imposed against Wells Fargo & Co. in April.

The CFPB said South Carolina-based Security Group Inc. made "improper in-person and telephonic collection attempts" and had been "physically preventing consumers from leaving their homes and visiting and calling consumers' places of work."

The regulator has slowed the pace of enforcement actions since Mick Mulvaney, who also serves as the White House budget chief, took over as acting head in November. Under former chief Richard Cordray, an Obama appointee, the CFPB issued dozens of enforcement actions annually, including 15 in the last six months of his tenure.

The bureau argued the practices were unfair because they placed debtors at risk of having their personal financial information revealed to third parties, including their employers. "Any marginal benefit in the form of more recoveries is outweighed by the substantial injury to consumers," the CFPB said in a consent order.

Security Group disagreed with the findings. The company said it "strongly disputes any wrongdoing" but agreed to pay the fine "to close the matter and move forward in serving our customers."

The company's wholly owned subsidiary Security Finance Corp. of Spartanburg donated $2,000 to Mr. Mulvaney, a former House Republican from South Carolina, during the 2016 election cycle, according to OpenSecrets.org.

Mr. Mulvaney has said he wants to focus the bureau's attention on companies that are disproportionately represented in its consumer complaint database. He has already indicated that debt collectors were in his line of sight.

"I have 407,000 complaints against your industry since the bureau came into existence," he told an audience of debt collectors at a Washington conference in May. "Y'all account for almost 30% of them by yourself," he told members of the Association of Credit and Collection Professionals.

Mr. Mulvaney has threatened to shield the database, which he called the " Yelp of financial services," from public view.

The acting CFPB chief said that about half of the country's debt collectors didn't sign up to the portal to respond to complaints on it. "That is a red flag to me," he said. "If you're not willing to respond to the complaint, that's a problem. I won't lie to you."

At the conference, Mr. Mulvaney said debt collectors were approaching consumers in sensitive circumstances. "I used to do a very small debt collection practice back in the 1990s, so I'm familiar with this," he said.

He also made an apparent reference to the Security Group case. "We had a debt collector actually go into somebody's house and refuse to leave until they were paid," he said, prompting laughs from the audience.

Mr. Mulvaney has said he plans to apply a proportional approach to determine which industries and companies were the worst offenders of consumer protection laws.

He suggested he might drop a case recommended by his staff against an unnamed company that had fielded thousands of consumer complaints.

"It turned out to be 6,000 out of several million, which if you do the math is a really, really small sample size," Mr. Mulvaney told reporters on Tuesday. "That did color and inform my decision on how to handle that case."

Write to Lalita Clozel at lalita.clozel.@wsj.com

(END) Dow Jones Newswires

June 13, 2018 17:05 ET (21:05 GMT)

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