California beefs up consumer protection for PACE financing

california PACE financing

California Governor Jerry Brown signed two bills into into law that provide a regulatory and consumer protection framework for Property Assessed Clean Energy (PACE) financing.

The companion pieces of legislation – AB 1284 and SB  – are the result of a year of development and negotiations among low-income consumer advocates, environmental and clean-energy groups, the banking industry, Renovate America and other private-sector PACE program administrators aimed at improving PACE by strengthening consumer protections.

Amisha Rai, Senior Director of California Policy at Advanced Energy Economy, said: “The PACE program is helping consumers and communities throughout California achieve greater energy savings while expanding access to advanced energy products and services. AB 1284 and SB 242 establish a clear, enforceable statewide consumer protection and regulatory framework for PACE that will serve as a model for other states. We are pleased to see California lead the way in passing this critical package.”

AB 1284 will significantly enhance PACE underwriting, regulate PACE at the state level, and enforce compliance with all PACE laws by PACE administrators and individual contractors.

Specifically, the bill will:

• Strengthen and standardize the current underwriting standards in PACE based on home equity and on-time mortgage and tax payment history; and require that the most accurate Automated Valuation Models are used for establishing the value of the home;
• Establish new underwriting standards predicated on income verification and ability-to-pay to determine that property owners can meet their annual PACE obligation in addition to their current debt obligations and basic household expenses; and
• Establish a licensing and regulatory framework for the PACE industry in California, which will be subject to oversight by the California Department of Business Oversight (DBO).

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The California Low-Income Consumer Coalition, made up of 11 consumer policy and legal advocacy organizations, worked to improve the legislation and says AB 1284 “introduces protections that have been absent from, and critically needed in, PACE programs.” The coalition moved from opposing the legislation to neutral, stating some reservations which the Department of Business Oversight will likely address in its regulatory process.

SB 242 will establish state-of-the-art consumer protections, further setting PACE apart from other forms of financing. Chief among these is the requirement that PACE providers conduct a recorded, live, confirmation of terms call with property owner before they sign their assessment contract, as a reinforcement to written disclosures modeled on the federal Know Before You Owe mortgage form. In addition, the law establishes data reporting requirements to local government partners, including data that speaks to the projected energy and water savings and local economic and job impacts, as well as on categories of products installed and homeowners served.

SB 242 also establishes an expanded “right to cancel” for a property owner using PACE, enabling the property owner to cancel their separate home improvement contract if they cancel their PACE financing within their three-day right to cancel. The law limits the amount of money that program administrators can pay to contractors, whether directly or indirectly, to the price charged by the contractor to the property owner. And it also prohibits the reimbursement of marketing, advertising, and program collateral expenses to restrict the usage of such reimbursement to evade the anti-kickback provisions.

 
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