If you’re considering going solar, be careful if you’re taking out a loan. The Consumer Financial Protection Bureau (CFPB) is warning homeowners about residential solar energy lenders who are misleading people, with some using deceptive factors to trap people into costly loans.
“While solar power can certainly help families save money, we want to make sure that the lending terms – that the loan itself, doesn't wipe away those savings and put people in a worse off position financially," said Gregg Gelzinis, a program manager at the CFPB.
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According to the CFPB, in 2023, 58% of solar projects were financed through loans, with the number of lenders on the rise. The bureau says some solar lenders are targeting consumers with hidden markup fees, misleading claims about what they will pay, ballooning monthly payments and exaggerated savings claims.
“We’ve heard a lot from consumers over the past couple of years about some deceptive and predatory practices that certain lenders are engaging at the point of sale,” said Gelzinis.
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These lenders work with solar installers and use high-pressure door-to-door sales tactics to attract homeowners.
“There are a lot of claims made about just how much money you can save if you on your energy bills, if you transition to solar. And while a lot of people can save money, it varies dramatically from home to home based on sort of the positioning of your home, how much sunlight you're expected to receive,” explains Gelzinis.
The CFPB also found that some lenders built hidden fees into loan principals that can increase costs by 30% or more above the cash price of the solar project.
“Some of the things that we've heard from consumers about some of the high-pressure door to door sales tactics are claiming that the tax credit is really going to make this loan cheap,” Gelzinis said. “So, the way that a lot of these loans are secured is they will offer you a fairly low monthly payment for the first 18 months with the expectation that you will qualify for federal and state, tax credits and then can make a big lump sum payment, often in month 19, to continue to lock in that low monthly payment.”
But this won’t be the case for every homeowner.
“We've heard from a lot of consumers that after a year and a half, in month 19, there's a massive increase in the monthly payment on that loan,” said Gelzinis.
The CFPB recommends homeowners ask for the cash price of the solar panel system. If the salesperson doesn’t answer, consider going to a bank or credit union for financing, and bring that loan offer to an installer.
Consumers should also request a detailed, written breakdown of costs before signing anything.
“The solar installers may not have the incentive to present you with all of the information that you need to make a prudent decision up front,” said Gelzinis. “You don't have to rush into this decision. This is a decision that you should take some time, explore all your options, and then move forward with west for you and your family's budget.”
There are several federal and state-sponsored loan programs that can help finance residential solar projects. Homeowners who believe they have been misled with their solar loan can file a complaint with the CFPB and the state attorney general.
