“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.”
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“From 2014-2020, a majority of PACE loans were for home improvements for natural disaster preparedness,” the CFPB wrote. “The obligation of paying the loan back through higher property tax payments remains with the property even if the borrower sells the property. Although PACE lending is authorized by local governments, private companies typically administer the programs, which can include marketing of the loans, managing originations, and making the lending decisions.”
In October 2022, the Federal Trade Commission and the State of California sued one of these private PACE administrators, Ygrene Energy Fund, to force it to stop deceptive, coercive, and fraudulent sales practices.
The new proposed rule comes five years after the Trump administration signed the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018, which ordered the CFPB to prescribe ability-to-repay rules for PACE financing and to apply the civil liability provisions of the Truth in Lending Act for violations.