FTC, California AG Order Company to Stop Deceitful Marketing of PACE Program

November 22, 2022

The Federal Trade Commission (FTC) and the California Attorney General recently took action against home improvement financing provider Ygrene Energy Fund Inc. for deceiving consumers about the potential financial impact of its financing, and for unfairly recording liens on consumers’ homes without their consent.

The FTC and California alleged that Ygrene and its contractors falsely told consumers that the financing for its Property Assessed Clean Energy (PACE) program wouldn’t interfere with the sale or refinancing of their homes, in many instances relying on high-pressure sales tactics or outright forgery to sign consumers up.

PACE loans are a controversial type of financing that allows homeowners to pay for energy-efficient retrofitting through their property tax assessments. These loans often take lien priority over the first mortgage lien. ALTA has said that when buying a home, Americans need to know if they are going to be responsible for someone else's debts. ALTA has supported proposed federal legislation that would modify consumer protection requirements for PACE loans.

“Ygrene and its sales force deceived consumers about home improvement financing and then stuck consumers with liens that made it difficult to sell their homes,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection. “Our proposed order would require Ygrene to clean up its business practices, monitor its sales force, and help defrauded consumers remove their liens.”

A proposed court order would require Ygrene to stop its deceptive practices and meaningfully oversee the contractors who have served as its salesforce. As part of the settlement, Ygrene will be required to dedicate $3 million to provide relief to certain consumers whose homes are subject to the company’s liens.

California-based Ygrene has provided PACE financing, a form of secured home-improvement financing, for clean-energy home improvements in parts of California, Missouri, and Florida. Since 2015, Ygrene has trained home-improvement contractors to market the company’s PACE financing to homeowners as a way to pay for energy upgrades (e.g., solar panels or updated insulation) to consumers’ homes. These sales often happen door-to-door, with contractors approaching consumers in their homes, selling both the energy upgrade and the supposed benefits of Ygrene’s PACE financing.

The FTC and California allege that Ygrene recruited and authorized home-improvement contractors, whom Ygrene did not adequately train or oversee, to sell its financing, leading to many consumers being deceived during the sales process and being unfairly subjected to liens on their homes without their express, informed consent. Specifically, according to the FTC and California, Ygrene and its contractors harmed consumers by:

  • Deceiving consumers about PACE’s impact on home sales: The complaint alleges that Ygrene or its contractors provided false or misleading information that the lien placed on their home as a result of PACE financing could simply be transferred with a property when it was sold. In fact, many mortgage lenders will not provide financing to buy a property unless the PACE lien is paid off in full.
  • Deceiving consumers about PACE’s impact on refinancing: In many cases, the complaint alleges, Ygrene or its contractors told consumers that the PACE lien would not interfere with their ability to refinance their homes. As with home sales, many lenders will not approve new financing until the PACE lien has been removed.
  • Trapping consumers with PACE liens without clear consent: In many cases, Ygrene relies on an electronic signing system for its financing agreements with consumers. In some of these cases, the complaint alleges, Ygrene’s contractor sales practices have prevented consumers from meaningfully reviewing or consenting to key disclosures concerning the PACE lien. Contractors have rushed consumers through the electronic signing of the financing agreement, which appears in small print and is often presented to the consumer on a mobile phone or handheld tablet device – in many cases owned by the contractor – with a small screen that adds difficulty to navigating and understanding the agreement. In other cases, the contractor has forged the consumer’s signature by e-signing the contract without the consumer’s authorization. The complaint notes that even in some instances after Ygrene has received an electronic signature and has called the consumer to explain the terms of the agreement, the company has failed to ensure that it was speaking to the consumer or that the consumer has given clear consent to the lien.

A copy of the settlement, which is subject to court approval, is available here.

 


Contact ALTA at 202-296-3671 or [email protected].