To improve earnings from the sale of charged-off debt, many consumer lenders are putting less of it on the market. The strategy is working as prices have inched up since late 2009.
While the prices being fetched vary by lender and by the quality of debt sold, most sellers have seen a price jump of about 10% since the beginning of the year, said Lou DiPalma, a managing partner at Garnet Capital Advisors LLC, which brokers sales of bad debt for companies such as Chrysler LLC, Wells Fargo & Co. and Navy Federal Credit Union. "Limiting the supply raises prices and with the strategy working, I don't expect to see issuers move away from it anytime soon," he said. "Issuers are cutting their supply by about half of what they previously had been bringing to market."