CFPB Proposes Rule to Protect Homeowners Seeking Clean Energy Loans

  • The CFPB proposed a rule establishing consumer protections for residents securing Property Assessed Clean Energy (PACE) loans, which are typically utilized by homeowners to cover clean energy home improvement costs such as solar panels or natural disaster preparedness. The financing is secured by a property lien on the borrower’s home and is paid back through higher property tax payments, but typically administered by private companies.
  • The proposed rule would impose ability-to-repay rules for PACE lenders, requiring them to assess a borrower’s ability to repay a PACE loan before issuance. It would also invoke the civil liability provisions of the Truth in Lending Act (TILA) for violations, and clarify how TILA applies given the unique nature of PACE transactions.
  • The CFPB also published a report in conjunction with the proposed rule that finds PACE loans can cause borrowers to fall behind on their mortgage payments. The requirements in the proposed rule are meant to prevent lenders from providing loans that homeowners cannot afford to repay.