On May 1, 2023, the Consumer Financial Protection Bureau (CFPB) proposed a rule to establish consumer protections for residential Property Assessed Clean Energy (PACE) loans.

A PACE loan is a way for consumers to borrow money for home improvements by increasing their property tax payments. Homeowners repay PACE loans through an additional assessment that is collected along with their regular property taxes. The loans are secured by a tax lien on the borrower’s home and are often promoted as a way to finance clean energy improvements such as solar panels. Although PACE loans are authorized by local governments, they are generally administered by private companies who market the loans and make the lending decisions.

The proposed rule takes aim at what CFPB Director Rohit Chopra described as unscrupulous companies who “bait homeowners into unaffordable loans with exaggerated promises of energy bill savings.”

If finalized, the rule would require lenders to assess a borrower’s ability to repay a PACE loan and would provide a framework for how these loans will be treated under the Truth in Lending Act. Specifically, it would adjust disclosure requirements in an attempt to help consumers understand the loans’ impact on their property tax payments.

We will continue to monitor this and other rule changes as the CFPB continues to adapt to changes in the lending marketplace.