The Consumer Financial Protection Bureau today published research alleging that when financial institutions attach “complex” pricing structures to products such as credit cards, mortgages and checking accounts, consumers pay more for those products. The bureau said its research has implications for understanding how so-called “junk fees” impair competitive pricing but didn’t propose any new policies as a result of the findings.
For the experiment, researchers divided participants into three groups of sellers and buyers, with different rules in each group for how sellers could price their products. For example, one group of sellers was allowed to pitch products using only a single price point while another group could pitch products using up to 16 “subprices” that added up to a single price. The report concluded that allowing sellers to incorporate complex pricing schemes increased their asks by more than 60% and increased actual transaction prices by more than 70%.
The CFPB claimed the results show how breaking up prices into various fees can increase costs for a range of financial products. “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 CFPB said in a statement.
