Beware of Predatory Clean Energy Loans
PACE program carries big risks for homeowners
Converting your home to solar energy can carry significant long-term energy savings - and have some environmental benefits.
But, the cost of adding solar panels to your house can be prohibitive.
That’s where PACE loans come in - the Property Assessed Clean Energy program is designed to allow homeowners to finance the cost of clean energy upgrades while combining payments with property taxes. In theory, the savings would cover the loan payment due at tax time. Eventually, customers would have the PACE loan paid back and enjoy low cost energy for years.
In reality, PACE loans typically cost more than other financing options and they can put a home at risk of foreclosure.
That’s why the Consumer Financial Protection Bureau (CFPB) is mandating new protections for borrowers considering PACE loans.
The rule requires a full disclosure of the project cost, the cost of the PACE loan, and a comparison of the PACE loan cost to other forms of lending. The CFPB found that bank loans and other forms of credit are often significantly cheaper than PACE loans. Additionally, PACE loans create challenges for homeowners if promised energy savings do not materialize or take longer to occur than advertised.
Consumer advocates expressed support for the CFPB’s action, noting the changes will benefit homeowners seeking green energy solutions.
“The CFPB’s PACE rule sends a valuable signal to lenders: green loan products, including loans to promote residential solar or energy efficiency, must include strong consumer protections like all other financial products.” said Jessica Garcia, senior policy analyst for climate finance at Americans for Financial Reform Education Fund. “In the coming years, millions more consumers will seek financing for green projects, such as retrofitting homes to be more energy efficient and resilient and to buy green products, like electric vehicles. Government programs, nonprofit organizations, lenders, and utilities offering that financing must do so in an affordable and transparent way in order to safely and equitably expand access to green lending.”
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Thanks for this info! I really wish there were programs that provided more genuine assistance with both solar and heat pumps. I know you can get some tax credits with heat pumps but they're really not enough to bring them into the realm of the possible for most families. I don't think I know a single person who wouldn't choose to switch to more environmentally friendly energy if they could afford it, and it's ridiculous that something necessary is being priced as something luxurious.