In my use case, I’m attaching a bullet decal to a pawn and I only want the decal to affect that pawn, but when that decal overlaps with another actor, the bullet decal then bleeds onto that actor, too, which looks weird.
Hopefully that makes sense 
I have the same issue, were you able to solve this?
You can set the other actor not to receive decals: Using Decals in Unreal Engine | Unreal Engine 5.2 Documentation
That’s not, quite what I’m looking for. I’d still like this other actor to receive decals, in general, but when I attach a decal to a specific actor, I’d like a way for the decal to only affect that attached actor.