How the Consumer Bureau is Protecting Homeowners Seeking Clean Energy Financing

Consumer bureau creates new protections for homeowners financing clean energy upgrades

Converting a home that uses traditional energy sources to one that relies on clean energy can mean long-term savings for a homeowner - but those savings often come at a steep upfront cost. A federal program exists that is designed to help homeowners make the clean energy switch, but until now, loans made under this program lacked significant consumer protections.

Now, the Consumer Financial Protection Bureau (CFPB) has announced it is creating new rules for the Property Assessed Clean Energy (PACE) loan program to ensure that consumers can pursue clean energy financing without the risk of losing their home.

PACE loans are typically secured by a lien against the borrower's home and used to finance a clean energy upgrade (like solar panels) to a home. The idea is that within a few years after the conversion, the homeowner has reaped enough savings to repay the loan. PACE loans were created to accelerate clean energy conversions by making them more affordable. In the long run, the homeowner stands to gain years of energy cost savings while also benefiting the environment.

However, some companies using PACE loans to finance their projects use suspect tactics to convince a homeowner to retrofit their home, according to a CFPB report. The conversion company gets paid by the proceeds of the PACE loan and the homeowner may be subject to foreclosure if the loan is not repaid on time.

“When unscrupulous companies bait homeowners into unaffordable loans with exaggerated promises of energy bill savings, this can lead to serious financial distress,” said CFPB Director Rohit Chopra. “We are proposing new rules that would require sensible safeguards on these clean energy loans.”

If finalized, the proposed rule would require PACE creditors and PACE companies to consider a consumer’s ability to repay when issuing a new PACE loan, and it would amend Regulation Z to address how the Truth in Lending Act applies to PACE transactions. Among other amendments, the proposed rule would adjust disclosure requirements to better fit PACE loans and to help consumers understand the loans’ impact on their property tax payments.

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