Fifth Third faces state inquiries over solar panel financing

Liam Kennedy/Bloomberg

Fifth Third Bancorp has been pulled into an investigation by 17 state attorneys general who are probing a solar energy lender the bank bought last year.

Cincinnati-based Fifth Third said in a securities filing that it's cooperating with "several civil investigative demands" regarding the lending practices and contractor relationships of its subsidiary Dividend Solar Finance. Dividend Finance lends to consumers who work with its network of solar panel installers and home improvement contractors.

In January 2022, when Fifth Third announced that it was buying Dividend Finance, home improvement projects were in the midst of a pandemic-driven boom, fueled by ultra-low interest rates. The acquisition became official in May 2022.

Since at least a month earlier, troubles at a solar panel installer that worked with Dividend Finance were starting to pop up.

Detroit's FOX affiliate reported in April 2022 on misleading sales pitches from PowerHome Solar, whose panels ended up costing more than customers expected and didn't work properly. Local TV stations across the country reported similar complaints about the company, which changed its name to Pink Energy around the time the complaints were arising.

The company filed for a Chapter 7 liquidation in October 2022. Several state attorneys general are investigating Pink Energy, and last year they sent letters to Dividend Finance and other lenders asking them to suspend customers' loan payments and interest accumulation.

A Fifth Third spokesperson declined to comment on whether it paused the loan payments as the state attorneys general requested, saying the bank would not comment beyond its SEC filing.

In its filing, Fifth Third said it got a civil investigative demand from 17 state attorneys general relating to Pink Energy's bankruptcy. It also said the case was "among" the several inquiries it's facing from state attorneys general "regarding the lending practices and installer relationships of Dividend Solar Finance." 

Fifth Third's solar energy installation loans are continuing to see growth. Between the start of the year and Sept. 30, "other consumer loans" at Fifth Third rose by $1.5 billion, or 31%, driven primarily by solar loans. Over the same period, the company reported small declines in various consumer loan categories, such as credit cards, mortgages and home equity loans.

Bryan Preston, Fifth Third's treasurer, highlighted the opportunities the bank sees in solar lending at an investor conference last week. 

Fifth Third and Dividend Finance are seeing strong customer demand for solar panel loans, and borrowers are having little trouble paying back their loans, Preston said. 

"The business has gone very well," Preston said, according to an S&P Global Market Intelligence transcript. "We're very happy with what we've been able to do, the business we acquired."

One key to ensuring that borrowers repay their loans is the quality of the solar panels that are installed, Preston said. Dividend Finance has a "very robust installer management program," which Fifth Third has "enhanced since they've become part of an OCC-regulated bank," he said. The Office of the Comptroller of the Currency regulates Fifth Third and other national banks.

The letter from state attorneys general last year also went to Cross River Bank, a Teaneck, New Jersey-based lender that did business with Pink Energy. A spokesperson for the $8.4 billion-asset bank did not respond to a request for comment.

Jayson Waller, the former CEO of Pink Energy, has blamed the solar panel failures on faulty equipment from Generac Power Systems. Generac, a Wisconsin-based manufacturer, has faced lawsuits over the issue, with customers arguing that its parts didn't work and sometimes burned.

Waller provides business coaching and hosts The Bam podcast. He's set to star in a reality TV show called "The Bam Fam," which the show's website describes as an "intense family drama meets millions of business dollars." 

"Waller, celebrated for his business acumen and recovering from a $400 million setback, is building new companies valued at millions and launching new ventures," the show's website says.

Pink Energy's bankruptcy case is still pending. A filing in federal bankruptcy court last year said the company had between 25,000 and 50,000 creditors.

In a statement, a Generac spokesperson said the company cannot comment on ongoing litigation but is "disappointed to hear of any instances where customers are not satisfied with the performance of their system."

"We understand that consumers are frustrated by their experiences with Pink Energy," the company said. "However, Generac remains committed to our customers. We stand by our products and warranty obligations."

The company asked customers to contact Generac for support if needed.