WASHINGTON, D.C. — Today, the Consumer Financial Protection Bureau (CFPB) issued a final rule that would apply existing mortgage protections to Property Assessed Clean Energy (PACE) loans and require lenders to approve these loans based on a borrower’s ability to repay. PACE loans, often used by homeowners to purchase solar panels, are paid back through property taxes.

Anneliese Lederer, senior policy counsel at the Center for Responsible Lending (CRL), made the following statement:

PACE loans promise energy savings while burdening borrowers with steep property tax increases. Lenders have exploited these loans by approving them solely based on borrowers’ home equities and not their ability to repay, leaving many vulnerable homeowners in a cycle of debt and at an increased risk of foreclosure.

We commend the CFPB for applying ability-to-repay standards to PACE loans and clarifying that they fall under TILA and Regulation Z to ensure that borrowers receive transparent mortgage disclosures. This rule will particularly protect low-income homeowners and communities of color from unsustainable, predatory lending practices and reinforce equity in the clean energy market.

Additional Background

PACE loans are often marketed to homeowners through door-to-door sales, with promises that home improvements will pay for themselves through energy savings or disaster preparedness. According to CFPB research, PACE loans increase property taxes by about $2,700 annually, increase a borrower’s likelihood of falling behind on their primary mortgage and are typically more expensive than first mortgages. The final rule provides examples of disclosure statements that lenders can use.

The Truth in Lending Act (TILA) is a federal regulation meant to protect consumers against deceptive lending practices. It requires lenders to clearly disclose all terms and costs associated with a loan. Regulation Z is the regulation that implements TILA. The final PACE rule clarifies that these loans are subject to the provisions of TILA and Regulation Z because voluntary tax liens and voluntary tax assessments are considered credit.

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Press Contact: Vincenza Previte vincenza.previte@responsiblelending.org