The Consumer Financial Protection Bureau (CFPB) has finalized a rule that imposes stricter regulations on Property Assessed Clean Energy (PACE) loans, a financing tool for clean energy upgrades and disaster preparedness projects repaid through property tax bills.
The new rule, announced on Dec. 17, applies Truth in Lending Act (TILA) protections to PACE financing and imposes ability-to-repay requirements to prevent lending practices that saddle homeowners with loans they can’t afford to repay.
PACE loans, which often target homeowners through aggressive door-to-door sales, finance projects such as solar panel installations that lenders often promise will pay for the loans through energy savings. Such loans often lead to unintended financial strain, according to CFPB, which notes that PACE borrowers see an average 88 percent property tax increase—around $2,700 annually—and are more likely to default on their primary mortgages than those using traditional financing. Despite promises of energy savings, PACE loans are typically costlier, with interest rates around five percentage points higher than first mortgages….