Sure, but on the other hand, let's say you run a small business. At some point you have customers who don't pay. What do you do? Write it off as a total loss? 1/12 is better than nothing.
Small businesses typically use flat fee collection agencies and rarely charge of the debt like this. Part of the reason is because to a small business charging off $10K in debt is going make them a couple hundred bucks at most.
There is no "little guy" getting stiffed by bad debtors in this story.
Even calling people to offer terms isn't profitable at 1/1200th of a $250 AT&T receivable and much of the portfolio is physically incapable of paying the two cents! The collector is hoping to get literally three in a hundred to pick up the phone and take an offer of $150, the bulk of which goes to labor to call them.
if i use a credit card foolishly and put myself into 2500$ debt, and over time receive a number of fees due to my late payments, my 2500$ debt can rise to 5000$ effortlessly,
at this point if i pay the bank 4000$, they made 1500$ off me already, then they decide to sell the remaining 1000$ for 1/12 its worth the original lender has been given 4083$ for an original 2500$ loan, and now the credit adjuster or whoever bought the debt could make 917$ by collecting the 1000$
i'd like to see statistics on how much an original debt was, how much has been paid into it, and how much it sold for
then we can discuss potential for 'total loss'
i wonder if you went to the lender and offered to pay your debt back at 1/12 its cost if they would sell the rights to your own debt to you?
About people that should "know better". Sure. Doesn't always happen, and people are not all perfectly rational, highly disclipined game-theoritic individuals. It's easy to preach "personal responsibility" from an ivory tower (and who knows what kind of privileged upbringing or lucky break), but it doesn't make those people less victims. It's like a woman victim of domestic abuse ― she should know better and leave the guy, but that doesn't make him any less of a prick.