WASHINGTON, DC – Federal consumer regulatory agencies today released data and resources that reflect findings in a paper released last week by the Center for Responsible Lending (CRL) that show the nation’s leading residential solar energy financing lenders currently use many of the predatory methods employed in the subprime mortgage lending market of 2007-2010 – including undisclosed profit arrangements with their preferred solar system installers and expensive financing with hidden fees – as a standard practice to target consumers for financial exploitation.

To mark the upcoming two-year anniversary of the Inflation Reduction Act, the U.S. Department of the Treasury (Treasury) released new data from the IRS and new analysis by the Office of Economic Policy showing that more than 3.4 million American families benefitted from $8.4 billion in tax credits to lower the costs of clean energy and energy efficiency upgrades to their homes during 2023. More than 750,000 families claimed investments in residential solar electricity, and households installing residential solar saved a median amount of $2,230 annually.

Treasury, along with the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC), announced a partnership to work together to address unfair and deceptive consumer acts and practices in the residential solar power sector. The agencies also will work with state regulators to identify and seek civil penalties for lenders who engage in predatory residential solar financing schemes or facilitate consumer scams using high-pressure sales tactics and misleading information about the costs and potential savings from home solar system installations. These tactics can leave consumers worse off than before they installed the solar system.

“Homeowners in communities across America want fair access to affordable clean energy solutions – like solar – that help them save money on home energy bills, protect the planet, and remain and thrive in the communities that they love,” said Mike Calhoun, president of CRL. “Environmental justice – especially in neighborhoods that have been disproportionately harmed by climate change and pollution – is interconnected with economic justice. CRL applauds these federal agencies’ efforts to develop the policy and regulatory infrastructure to ensure an equitable green lending marketplace for all consumers.”

CRL’s report, The Shady Side of Solar System Financing, analyzed contracts, securities statements, state and federal consumer complaint databases, newspaper articles, and lawsuits involving the nation’s five largest residential solar finance companies – GoodLeap, Mosaic, Sunlight Financial, Sunnova and Sunrun. These five companies account for approximately 80 percent of the residential solar financing market. All five companies’ sales and marketing practices mimic the predatory and dangerous tactics used by subprime mortgage lenders.

About 70 percent of residential solar systems installed last year were financed through a lender. This solar debt can contain hidden fees and add-on costs that significantly increase the payments for the homeowner and can increase the risk that the borrower will lose their home to bankruptcy or foreclosure. The potential negative financial impact on millions of consumers is clear from court filings and consumer complaints to regulators.

In addition, lenders’ affiliated solar system installers often perform improper or incomplete solar panel installations that prevent homeowners from receiving the full benefit of reduced fossil fuel energy usage. CRL’s paper, The Shady Side of Solar System Financing, found that these harms exist across all states.

CRL urged state regulators and local advocates to be aware of the home solar lenders operating in their state, and ensure they are not taking advantage of consumers. CRL’s analysis identified several areas of concern in residential solar financing, including:

  • Misleading sales practices: often involving misrepresentations regarding the cost-effectiveness of solar installations or the availability of tax benefits or government subsidies to pay for the product.
  • Unsrupulous installers: installers frequently provide incomplete or inadequate solar panel installations and fail to disclose utility system “red zones” – where net metering is prohibited – that reduce the benefits of solar power installation.
  • Predatory contract clauses: including forced arbitration clauses; undisclosed financial incentives between lenders and salespersons; failing to inform the consumer of their right to rescind; contract language that does not follow the borrower’s native language; and forged consumer signatures.
  • Other harmful practices: including liens that may impair the title to the home in some jurisdictions; elder abuse; and lack of third-party due diligence.

The federal agencies' websites provide resources on how to choose residential solar systems and installers, avoid scams, and report bad actors for enforcement actions. In a webinar announcing the data and enforcement focus, agency leaders said that eliminating bad actors and scammers is necessary to accelerate adoption of residential solar systems to save money on energy bills, help meet national energy goals, and sustain the growth and development of the U.S. solar manufacturing industry.

Agency leaders said encouraging local consumer advocates and state enforcement authorities to regulate bad actors in the solar and clean energy markets also will protect honest companies trying to compete fairly.

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Press Contact: Alfred King alfred.king@responsiblelending.org