Purpose: Age-related declines in auditory temporal processing and cognition make older listeners vulnerable to interference from competing speech. This vulnerability may be increased in older listeners with sensorineural hearing loss due to additional effects of spectral distortion and accelerated cognitive decline. The goal of this study was to uncover differences between older hearing-impaired (OHI) listeners and older normal-hearing (ONH) listeners in the perceptual encoding of competing speech signals. Method: Age-matched groups of 10 OHI and 10 ONH listeners performed the coordinate response measure task with a synthetic female target talker and a male competing talker at a target-to-masker ratio of +3 dB. Individualized gain was provided to OHI listeners. Each listener completed 50 baseline and 800 "bubbles" trials in which randomly selected segments of the speech modulation power spectrum (MPS) were retained on each trial while the remainder was filtered out. Average performance was fixed at 50% correct by adapting the number of segments retained. Multinomial regression was used to estimate weights showing the regions of the MPS associated with performance (a "classification image" or CImg). Results: The CImg weights were significantly different between the groups in two MPS regions: a region encoding the shared phonetic content of the two talkers and a region encoding the competing (male) talker's voice. The OHI listeners demonstrated poorer encoding of the phonetic content and increased vulnerability to interference from the competing talker. Individual differences in CImg weights explained over 75% of the variance in baseline performance in the OHI listeners, whereas differences in high-frequency pure-tone thresholds explained only 10%. Conclusion: Suprathreshold deficits in the encoding of low- to mid-frequency (~5-10 Hz) temporal modulations-- which may reflect poorer "dip listening"--and auditory grouping at a perceptual and/or cognitive level are responsible for the relatively poor performance of OHI versus ONH listeners on a different-gender competing speech task.