The Consumer Financial Protection Bureau today finalized a rule that applies the Truth in Lending Act’s ability-to-repay requirements and civil liability provisions to residential property assessed clean energy loans, or PACE loans.
Residential PACE loans are used to fund energy-efficient home improvements, with payments added to the borrower’s property tax bill as a voluntary assessment. The final rule implements a law passed by Congress in 2018 meant to address concerns about subprime lending in the residential clean energy market. The rule ensures that PACE borrowers have the right to receive standard mortgage disclosures that allow them to compare the cost of the PACE loan with other forms of financing, according to a CFPB summary. It also ensures that lenders are responsible for ensuring that the borrower is not set up to fail with an unaffordable loan.
The American Bankers Association has called for TILA’s ability-to-repay requirements and civil liability penalties to be applied to PACE loans, emphasizing that the loans are “consumer credit” and therefore subject to Regulation Z. The association joined with 12 other groups in July in support of the proposed version of the rule.
