CFPB Warns Homeowners About Risks of Solar Energy Loans Amid Rising Energy Costs

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WASHINGTON, D.C. — As record heat waves sweep across the nation, many homeowners are seeing a spike in their energy bills. This has led to an increased interest in solar panels and other solar energy systems to help reduce long-term costs. While solar energy can be a valuable investment, the Consumer Financial Protection Bureau (CFPB) has issued a consumer advisory warning against the pitfalls of costly and complex loans for solar energy installations.

Homeowners are generally eligible for tax credits to offset part of the cost of installing solar energy systems. However, the CFPB has noted an increase in aggressive sales tactics from companies deploying door-to-door salespeople. These salespeople often pressure homeowners to sign up for solar energy systems and the loans required to finance them, frequently without fully disclosing the upfront and long-term costs.

The CFPB’s advisory aims to educate the public on the potential issues associated with solar energy loans and financing agreements. According to the bureau, consumers have the right to seek trusted advice on lowering their energy bills and adding solar energy to their homes. They should explore their options before committing to any agreements from door-to-door salespeople and be aware of their rights to exit such contracts.

A recent CFPB report highlights some common problems faced by borrowers of solar energy loans:

Hidden Markups and Fees: Many consumers expect to pay a fair price for solar energy systems, but the CFPB has found that some sellers add undisclosed dealer fees to the loan amount. These hidden fees inflate the total cost and make the interest rate appear lower than it actually is.

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Misleading Loan Amounts: Sales pitches often emphasize the value of tax credits, which can be substantial. Some salespeople reduce the projected tax credit from the loan amount to make the deal look more attractive. However, this means consumers might be borrowing more than they realize, and the actual tax credit may not reflect their personal tax situation.

Surprising Loan Terms: Loan agreements may contain clauses that increase monthly payments after 18 months unless a lump sum matching the projected tax credit is paid. This can catch borrowers off guard, especially if they did not receive the expected tax credit.

Uncertain Energy Savings: While solar energy systems can reduce energy bills, predicting exact savings is challenging. Homeowners might also have to cover maintenance and repair costs, which can significantly affect the overall cost-benefit analysis.

To avoid falling victim to high-pressure sales tactics, the CFPB advises consumers to consider federal, state, and local programs that offer free or subsidized energy efficiency improvements. These programs can provide a cost-effective alternative to installing a solar energy system. An independent energy audit can also help identify other energy-saving opportunities, often at a lower cost.

For those who decide to proceed with solar energy installation, the CFPB recommends asking for the cash price of the system and seeking financing from a bank or credit union. Comparing multiple proposals and getting a detailed, written breakdown of costs can help consumers make informed decisions. An independent energy auditor can review these proposals to ensure consumers choose the best option.

If homeowners find themselves stuck with a bad deal, they can file complaints with multiple agencies and consult an attorney. Federal regulations may offer the right to cancel certain door-to-door sales contracts.

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The CFPB’s advisory is a crucial reminder for homeowners to exercise caution and diligence when considering solar energy systems, ensuring they fully understand the financial implications before making any commitments.

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