Consumer advisory: Steer clear of costly and complex loans for solar energy installation
By Consumer Financial Protection Bureau
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Most Americans are eligible for tax credits to partially offset the cost of solar energy installations. More and more companies now deploy door-to-door salespeople to pressure homeowners to install solar energy—and to borrow money to pay for it.
While saving the environment and reducing energy use are highlighted, upfront
and long-term costs for installation and maintenance aren’t always part of the
sales pitch. As a result, homeowners can be pressured into complicated solar
loans or financing agreements without understanding the costs and risks.
Solar energy can be a valuable investment that saves you money. But today, the Consumer Financial Protection Bureau is issuing this consumer advisory to help people avoid problems and pitfalls in solar energy loans.
The CFPB is reminding people that they have the right to find trusted
help lowering their energy bills and adding solar energy to their homes. People
generally have options they can consider before signing anything from a
door-to-door salesperson. And homeowners could have the right to get out of
their solar loans and contracts.
The CFPB has published
a report about how solar energy home systems are sold and financed.
The report describes some of the problems borrowers experience with solar
energy loans.
Hidden markups and fees inflate the cost of loans
Many homeowners expect solar energy equipment to be sold at
a fair price. However, the CFPB has found that sellers might inflate the cost
by adding so-called dealer fees to the loan. This means that you borrow more
money than the actual price of the system and its installation. The dealer fees
are rarely shown to the customer, though they increase the total amount of the
loan. And, they make the interest rate on the loan look artificially low.
Loans might look smaller than what you really signed up
for
High-pressure sales pitches tout the new tax credits,
because they can be so valuable. Some salespeople subtract a projected tax
credit from the amount of the loan and show that lower amount to you, to close
the sale. This means the price presented to you seems lower than the total you
are really borrowing. What’s more, because the seller doesn’t know your tax
situation, the projected tax credit might not be accurate and the actual tax
credit might take time to arrive.
Loan terms might shock the borrower
The loan terms often contain a jolt: The monthly payment
jumps higher after 18 months unless you make a payment that matches the amount
of the projected tax credit, whether or not you ultimately receive a tax
credit. Even a customer who makes all their loan payments on time could be
surprised by a higher payment after 18 months.
Energy savings might not measure up
Solar energy sales pitches often say the programs and
equipment pay for themselves through lower energy bills or tax benefits. While
solar energy installations can lower your energy bills, the exact savings are
hard to predict. Sometimes, you have to pay for upkeep and repairs in addition
to high loan payments. When cost savings or other benefits are promised and not
delivered, you could be stuck with a solar energy system that costs more than
you thought.
Ways to save energy without high-pressure sales
Some federal, state, and local programs offer free or
subsidized energy efficiency, weatherization, and or solar home improvements.
You can look into these less expensive options before you sign anything or pay
for improvement.
An independent energy audit of your home might show that it
costs less to buy energy-efficient appliances or weatherize your home.
Independent auditors are not connected to a particular lender or installer and
do not make money based on the energy improvements you make. Look
up an auditor near you .
If you decide to go ahead with a solar energy installation,
ask the salesperson what the cash price of the system is. If they don’t give
you a straight answer, consider going to a bank or credit union for financing,
and bring that loan offer to the installer. Then, shop around and compare
proposals from multiple installers and lenders. Ask for a written breakdown of
the work they will do, the materials they will install, and the cost of each
one. An independent energy auditor can go over the proposals with you, to help
you choose.
Ways to seek help if you got a bad deal on your solar
energy system or loan
You can submit a complaint to multiple places, and you can
also consult an attorney at the same time. See
tips for finding an attorney in your state. In some cases, you might
have the right to get out of your contract. For example, under federal
regulations, some door-to-door sales give people the right to cancel.
Submit a complaint to the CFPB
You can submit a complaint about a problem with a financial
product or service at consumerfinance.gov/complaint or
by calling (855) 411-CFPB (2372).
To submit a complaint about solar energy loans, please
select “Payday loan, title loan, personal loan or advance loan” as the type of
product, then select “Installment loan.” Whether a company responds to you or
doesn’t, your complaint makes an impact by helping us, other agencies, and law
enforcement find bad business practices, spot problems and patterns, and
regulate companies.
With your consent, we also publish your description of what
happened, after taking steps to remove personal information.
Report fraud to the Federal Trade Commission
If a business doesn’t make good on its promises or cheats
you out of your money, the Federal Trade Commission accepts tips: ReportFraud.FTC.gov .
Submit a complaint to your local enforcement agency
Complaints about companies doing business in your area can
be submitted to your state’s
attorney general .
Whistleblower tips
If you work or formerly worked for a company and believe the
company has violated federal consumer financial protection laws, send what you
know to whistleblower@cfpb.gov.