Three Republican senators introduced a bill this week designed to deter predatory lending practices associated with the financing and installation of energy and water efficiency upgrades.

The bill, sponsored by Sens. Tom Cotton, R-Ark., Marco Rubio, R-Fla., and John Boozman, R-Ark., would require Truth in Lending Act disclosures for Property Assessed Clean Energy loans, which are currently exempt from the law.

"Predatory green-energy lenders are changing state and local laws to trick seniors into taking out high-interest rate loans for 20 years, along with liens on their homes, for technology that could be obsolete in a few years," the senators said in a statement.

The Protecting Americans and Credit Entanglements Act is being supported by some in the mortgage industry, and has bipartisan support in the House.

"PACE loans are mortgage-related financing and should adhere to federal mortgage financing rules," David Stevens, the president and CEO of the Mortgage Bankers Association, said in a statement Thursday.

But PACE industry groups and firms have fired back, arguing the legislation is not about protecting homeowners but dismantling PACE programs in operation in 32 states across the country.

David Gabrielson, executive director of industry trade group PACENation, criticized the bill as a “thinly disguised effort” to kill off PACE programs to protect banking interests “that only see PACE as competition for market share.”

“Observers should look beyond the inflammatory rhetoric and focus on common sense and basic facts,” he said Gabrielson, in a statement.

Companies that operate in the space – including Renovate America and Renew Financial – also issued statements opposing the legislation, saying it would kill jobs and is unnecessary due to the U.S. Dept. of Energy consumer best practices that PACENation members voluntarily follow.

They also point out stronger consumer protections were enacted this year – with bipartisan support – the state level in California, an epicenter of PACE program activity. 

J.P. McNeill, chief executive of Renovate America, the largest PACE financier in the nation, urged Congress to pass legislation that “codifies” strong consumer protections but recognizes the “innovation in financing that PACE represents.”

A similar PACE Act bill has been introduced in the House by Reps. Brad Sherman, D-Calif., and Ed Royce, R-Calif.

"PACE programs provide an important source of financing for consumers looking to make energy-efficient changes to their homes. But the current process presents homeowners with many challenges and can result in homeowners being misled about the terms of their loan,” Sherman said. “We must ensure that homeowners concerned with promoting energy efficiency, conservation, and a cleaner environment are given the tools to be successful."

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.