I happen to know a little about this because my fund is short a publicly-traded company that buys up defaulted credit card debt and goes after the defaulters us

I happen to know a little about this because my fund is short a publicly-traded company that buys up defaulted credit card debt and goes after the defaulters using shady practices, threatening letters etc. Competition does affect this figure. Back in 2008-09 when the usual competitors in this space didn't have the balance sheet to operate, the few who could buy defaulted debt were making 40-50% returns by effectively buying up debt that they expected to recover $2,000 from for $1,333 (I'm simplifying here because it takes several years to recover the money and there is a present value calculation to be done). By contrast, fast-forward to last year and at best these companies will only make a 7 or 8% return, barely enough to cover their cost of capital. That return is lowered from the 50% return of the 08-09 era either by the companies bidding against each other and ultimately paying more than the $1,333 for the defaulted debt from the original issuer, or by accepting less than the $2,000 for settling with the debtor. It will not go to zero however - the lower limit is the cost of capital of the companies that buy this debt up. There is some good news in this space - recent U.S. legislation has targeted some of the shady practices used by these companies (which is one of the reasons we're short the publicly-traded company).