Weird sliding behavior with CMC's Physics Interaction

Please take a look at this video:

In the video, we can see that after a few tries, dropping the item makes it slide on what looks like the capsule component’s edge. I am not sure why this happens, the character is set to block the item, but the item is set to overlap the character. Reason being I do not want full collision physics, just pushing the item out of character’s way. This way character is not able to step up on the item, but will still be able to push the item using the CMC’s Physics Interaction. I tried adjusting the push factors in CMC and that stuff, nothing helped. How do I fix this?