Minnesota regulators have smacked a debt collection company for employing felons and failing to notify regulators when it fired agents for harassing people and swearing at them.

NCO Financial Systems Inc., a Pennsylvania company doing business in Minnesota, didn't admit to wrongdoing but agreed to a $250,000 fine and orders to overhaul its employee screening process, according to a consent order the state Department of Commerce released Friday.

According to the agreement, NCO Financial didn't inform the Commerce Department when it fired registered debt collectors for violations such as vulgar language, swearing at and harassing debtors or failing background checks. In one instance, a management team member was fired after allegedly stealing company funds from a debt collector incentive program.

"Turning loose convicted felons on vulnerable Minnesota consumers is a dangerous recipe for fraud and financial abuse," Commerce Commissioner Mike Rothman said in a statement.

The consent order is the latest in the state's sweep of the collections industry after a 2010 Star Tribune investigative series, "Hounded," that revealed debt collectors' pattern of hiring criminals. NCO Financial Systems was one of the companies highlighted in the series.

The Commerce Department has taken formal actions against eight other debt collection companies, including six that allegedly employed convicted felons as debt collectors. Several of the companies were based in Minnesota.

NCO Financial had more than 5,000 registered debt collectors around the country and 49 collection agency locations, including one in Mendota Heights, according to the department, which described NCO as one of the nation's largest debt collection companies. When the department started investigating the company last year, about 160 debt collectors were operating out of NCO's Mendota Heights location, it said.

NCO Financial did not return phone calls Friday.

Collections expert Robert Hobbs, a deputy director of the National Consumer Law Center in Boston, lauded Minnesota regulators for checking on what he described as a fairly widespread problem. It's not uncommon for ex-convicts to work in debt collections, he said, which can pose problems because they handle sensitive private financial information such as Social Security and credit card numbers. Some ex-felons have anger management issues, he said, and "this is not a job for angry people."

A major industry trade group described the sweep as unique to Minnesota.

"This is not a national issue, this is something that's centered around Minnesota," said Mark Schiffman, spokesman for Minneapolis-based ACA International, which represents third-party debt collection companies. "We are working with regulators in Minnesota and in every state ... to create as balanced a system as possible to be able to collect our debts that are duly owed, and balance consumer rights."

Earlier this month NCO Financial settled with 19 states to resolve accusations of unfair debt collections practices. Wisconsin is part of the agreement, but not Minnesota.

Without admitting wrongdoing, the company agreed to pay $575,000 to the group, provide its agents with additional training and monitoring and set up a $50,000 fund in each state to reimburse consumers who were affected. Consumers may be eligible for refunds if they paid NCO for a debt they didn't owe, overpaid interest or paid more than what NCO agreed to settle the account.

Jennifer Bjorhus • 612-673-4683