The more complicated the pricing structure of a product or service, the more likely that a consumer will pay more, according to a report published yesterday by the Consumer Financial Protection Bureau. The report is another arrow in its attack on junk fees, saying that where consumers have to evaluate prices that are broken into sub-parts instead of one total fee, they will overpay.
While the objective of the report was to look at financial products like credit cards, mortgages, and auto loans, there are still implications for the accounts receivable management industry as well. The psychology of getting consumers to make a payment using documents like the Model Validation Notice, coupled with legal theories like the least sophisticated consumer standard make it clear that the CFPB is pushing companies to make things as simple as possible for consumers to understand and instances where pricing is complicated will be subject to additional scrutiny.
Researchers at the CFPB conducted a study in which objects that were for sale either had a single price, or had prices that were split into eight or 16 sub-prices. The more sub-prices that there were, the researchers found, the more the average selling price rose. Products with 16 sub-prices, for example, had sellers asking for prices that were 60% higher than those with a single price. Buyers were also 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 where products had 16 sub-prices than those with one price.
Making things more complicated or including additional fees “impede fair and competitive pricing” the CFPB noted.
