ABA Calls for Broader Application of TILA to PACE Loans

The American Bankers Association yesterday offered feedback to the Consumer Financial Protection Bureau on its planned rulemaking on of residential Property Assessed Clean Energy loans, a controversial type of financing that allows homeowners to pay for energy-efficient retrofitting—such as solar panels and high-efficiency air conditioners—through their property tax assessments, and which often take lien priority over the first mortgage lien.

S. 2155, the regulatory reform law enacted last year, requires the CFPB to apply the Truth in Lending Act’s ability-to-repay requirements and civil liability provisions to PACE loans. In its comment letter, ABA reiterated its view that PACE loans are “consumer credit” and therefore subject to Regulation Z, and urged the CFPB to apply additional aspects of TILA to these loans, including the law’s three-day right of rescission.

“If PACE advocates truly believe in providing borrowers with affordable and beneficial financing options for energy efficiency and related products and services, they should be willing to provide a borrower with the right to compare financing options as afforded by this important consumer protection set forth by TILA,” ABA said.