WASHINGTON (Reuters) - Mick Mulvaney, the head of the U.S. Consumer Financial Protection Bureau (CFPB) on Wednesday fined a payday lender $200,000 for wrongly hounding borrowers but the penalty fell short of the $3 million his predecessor was seeking, said three sources familiar with the move.

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Cash Express LLC, which operates more than 300 storefront lenders in southern U.S. states, made empty threats to ruin customers’ credit scores as a way to coerce payment, the CFPB concluded in a settlement announced on Wednesday.

Cash Express "did not actually report this information" to credit bureaus like Equifax Inc EFX.N, which made the tactic an abuse, the CFPB determined.

But while Mulvaney, the top cop for U.S. consumer finance, ordered the company to pay a $200,000 penalty for misleading customers and other abuses, his predecessor Richard Cordray had wanted to fine the payday lender $3 million, according to the sources.

Since taking office in November, Mulvaney has diluted fines against several lenders that he determined had broken the law.

In the past, a Mulvaney spokesman has said the bureau reduced penalties because the CFPB will not “shake down the productive sector just because we can.”

A spokesman did not immediately respond to a request for comment on Wednesday.

Cash Express also did not respond to a request for comment.

Cash Express is headquartered in Tennessee but also operates in Alabama, Kentucky and Mississippi where customers can face triple-digit interest rates to borrow against their car or future paychecks.

For consumers who do not have a bank account, Cash Express is an option for having a check cashed but that service was abused, the CFPB concluded.

Desperate borrowers did not realize that Cash Express would take a cut of their check to pay down outstanding debts, the CFPB found.

In one instance, a woman who entered a Cash Express carrying a sick baby to redeem a $250 check was upset to leave with only $30 because the company had garnished the check, the CFPB heard.

Mulvaney agreed that Cash Express used abusive practices when it seized the proceeds of checks from borrowers and wrongly threatened to ruin their credit.

Mulvaney also agreed with Cordray that Cash Express was wrong to collect expired debt from consumers. But Mulvaney declined to make Cash Express pay for harassing telephone calls and home visits that Cordray had identified as a violation of the law.