Consumers Pay More for Products With More Complex Pricing Structures, CFPB Finds

In a new report, prepared as part of the Biden Administration’s junk fee initiative, the CFPB found that consumers tend to pay more for products with more complex pricing structures. The Bureau says that this 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.”

In the research experiment, CFPB researchers asked study participants to act as buyers and sellers in a series of transactions.

“In some cases,” the Bureau says, “the objects for sale had a single all-in price, while in other cases the prices were split into 8 or 16 sub-prices. In the scenarios with more complex pricing, buyers tended to far worse. The average selling prices rose, buyers had more difficulty comparing prices across sellers, and the overall amount paid rose.”

The Bureau says this supports its argument that junk fees increase overall prices beyond what a fair and competitive market would allow, even though the experiments were “not expected to exactly mirror real-world transactions.”

As outlined in a press release, the Bureau says that the main detrimental outcomes consumers experienced from complex pricing structures are higher total prices with sellers total asking price 60 percent higher in markets with 16 sub-prices, buyers finding it more difficult to compare prices where pricing structures are more complex, and consumers paying more overall in markets with more than one price.

The full report, Price Complexity in Laboratory Markets, is available at https://files.consumerfinance.gov/f/documents/cfpb_price-complexity-in-laboratory-markets_2024-04.pdf.