Bureau: Study finds complex pricing schemes through ‘junk fees’ lead to consumers paying up to 60% more

Consumers tend to pay more for products – up to 60% more – when prices are separated into multiple fees through more complex, difficult to understand pricing structures, according to a study released Tuesday by the federal consumer financial protection agency.

The study, the Consumer Financial Protection Bureau (CFPB) indicated, is linked to the agency’s assault on so-called “junk fees” associated with various loans.

The bureau said the study is based on experiments with multiple rounds of buyers and sellers interacting in simple markets. It found, the CFPB asserted, that participants tended to pay more when prices were broken into sub-parts and were harder to understand.

“The research has implications for understanding how junk fees impede fair and competitive pricing in markets like auto loans or mortgages, where consumers have to evaluate extended warranties, add-ons, closing costs, and a wide variety of other fees instead of an all-inclusive price,” the bureau contended in a release.

In conducting the study, the bureau said, it asked participants to act as buyers and sellers in a series of transactions. In some cases the objects for sale had a single all-in price, CFPB said, while in other cases the prices were split into eight or 16 sub-prices.

“In the scenarios with more complex pricing, buyers tended to fare worse,” the agency said. “The average selling prices rose, buyers had more difficulty comparing prices across sellers, and the overall amount paid rose. These findings contribute to a growing consensus of research and real-world observations showing that junk fees increase overall prices beyond what a fair and competitive market would allow.”

The bureau asserted the study found that the complex pricing schemes “generally led to more detrimental outcomes for consumers.” Those included higher total prices, difficulty in comparing prices, and consumers paying more overall.

CFPB said sellers’ total asking prices were 60% higher in markets with 16 sub-prices than in those with one price; buyers were 15 times more likely to select a higher-priced option in markets with 16 sub-prices than in those with one price; and transaction prices were 70% higher in markets with 16 sub-prices than in those with one price, on average.

CFPB Publishes Research Finding Higher Price Complexity Leads Consumers to Pay More

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