Consumer advocates say Florida’s PACE home improvement loan program needs fixes

Florida has more homeowners paying for home improvement to their property through their tax bills than most states, yet it has the fewest consumer protections in the nation for the controversial loan program.

The property assessed clean energy program, also known as PACE, is only available for residential projects in three states — California, Missouri and Florida — and has drawn scrutiny, investigations, lawsuits and complaints in all three. Yet bills introduced in Tallahassee to extend consumer protections have failed year after year.

“There is zero oversight in Florida over PACE loans,” said Mike Fasano, Pasco County’s tax collector and a longtime critic of the program. “You can take a car loan, a home loan, and there’s oversight. But you take out a loan to get a new roof from PACE and there’s nothing.”

Unlike traditional loans, PACE financing doesn’t require a credit check or money down. That’s an appealing offer for many Floridians — particularly in Miami-Dade, which leads the state in PACE contracts — who want more hurricane-resistant roofs and windows and more efficient AC units as insurance and energy costs continue to skyrocket.

The industry defends its program, which it says fills a critical niche for homeowners.

“PACE at its core is a powerful public policy tool that enables state and local governments to meet important sustainability goals by attracting private capital to advance key policy priorities, like storm hardening, reduced carbon emissions, and higher energy savings,” Leah Wiggs, vice president of government affairs at PACE provider Renew Financial, told the Miami Herald in a statement. “Without PACE, many Floridians may not be able to access affordable financing options for essential and, sometimes, critical home upgrades.”

Most consumer advocates support the concept but they do question some industry practices — and lax state regulations and oversight.

Perhaps the biggest problem, consumer advocates say, is that PACE operates under looser approval and disclosure rules than traditional loan providers.

In fact, PACE providers are explicitly exempt from the Truth In Lending Act, a federal law that compels lenders to ensure the borrowers can afford to pay back the loan and understand exactly what the loan will cost them.

As a result, some consumers have complained they were unprepared for the costs of the annual lien they must pay through their tax bill. And without the lending act protection, they also don’t have the option of suing PACE providers if they suddenly find themselves stuck with a financial agreement they didn’t fully understand or can’t actually afford.

This critique fueled a class-action lawsuit and prompted an order from the Federal Trade Commission holding that one of the nation’s biggest PACE providers defrauded customers.

Another issue: The state Attorney General’s office, which confirmed it is pursuing an investigation into Ygrene Energy, the state’s largest PACE provider, has broad oversight of consumer issues. But there’s no dedicated watchdog assigned to monitor the industry, at least one with real teeth.

Only one little-known board, the South Florida Green Corridor, technically oversees Ygrene.

Composed of seven mayors or political appointees, the board was largely created as a mechanism to allow private lenders to collect fees, interest and loan repayments through government-issued property tax bills. The board reviews rate hike requests and other issues but has done little to address mounting consumer complaints over misleading advertising from some contractors and a surprise five-month shutdown by Ygrene that yanked funding from ongoing projects across the state. Ygrene would not answer questions from The Miami Herald about complaints or its withdrawal from the market in October.

Other states have taken tougher steps. In California, for instance, the Department of Financial Protection and Innovation regulates PACE providers and investigates complaints. It even kicked out one provider after repeated complaints of fraud.

In Missouri, after a ProPublica investigation found PACE providers were disproportionately targeting low-income Black homeowners with high-interest loans that — with interest and fees— sometimes added up to more than the homes were worth, the state passed strict new consumer protections.

In Florida, oversight varies by county and some are much more aggressive than others.

“Me and my staff have become the overseer in effect because there’s no one watching over PACE,” said Pasco tax collector Fasano, a former state lawmaker who said his office began getting complaints from residents who didn’t understand why their tax bills suddenly shot up shortly after the program was introduced to Florida a decade ago.

“We get the brunt of it because we’re the ones sending the tax bill out,” he said. “Most of the time their question to me is ‘What’s a PACE loan?’”

In response, his office hired a full-time staffer to call all homeowners once a lien was placed on their home by a PACE provider and explain in detail what exactly they were signing up for and how their tax bill would be affected. Fasano said some potential customers back out once they hear the whole explanation, but most stick with their PACE agreements.

As more complaints surfaced, other counties soon followed Pasco’s lead by introducing stronger consumer protections and disclosure forms for new PACE customers.

In a presentation to commissioners, Palm Beach County’s tax collector found some PACE liens that lasted for longer than the lifespan of the home improvement — like a 20-year loan for a new AC unit. The county now has a mandatory disclosure form all PACE customers must sign.

Collier County banned the program after Habitat for Humanity found liens on 25 of its homes, some with allegedly forged signatures, the Naples Daily News reported. Hernando and Hillsborough counties soon followed with their own bans.

Broward County has a few additional rules, including requirements that contractors charge market prices for their products and that total costs don’t exceed certain amounts. Miami-Dade requires that PACE materials be provided in multiple languages.

The only existing state requirements for PACE providers are to ensure that contractors are properly licensed, homeowners are up to date on mortgage and property taxes and that both parties still agree to move forward after a three-day waiting period.

In response to county complaints, the private lenders that bankroll PACE have added some additional protections, like recording phone calls with customers, providing more fleshed-out financial disclosure forms and providing information to prospective customers in several languages. The industry insists its protections are more stringent than any state or federal government requires.

“Ultimately, our goal is to ensure the highest quality of consumer safeguards,” PACENation Executive Director Colin Bishopp said in a statement touting the new protections.

But even as complaints rise, efforts to make those steps mandatory across the industry have failed two years in a row in the Florida Legislature.

The state’s watchdog for consumer fraud, the attorney general, has only recently begun investigating PACE complaints. The agency filed a civil complaint against contractor Louis Bruno and his Bonita-based businesses two years ago after receiving 248 complaints accusing him of misleading customers and jacking up the prices for simple home improvements. Bruno did not admit wrongdoing but agreed to refund $100,000 and remove liens from affected homeowners.

The agency also has confirmed to the Herald it has an open investigation into Ygrene’s practices after receiving more than 100 complaints.

For some customers, their jacked-up tax bills come as a shock — and hammer home that PACE isn’t a “government program,” as it is sometimes misleadingly advertised by contractors. It’s a bill to be paid and it can be big.

For example, a woman in Miami Gardens saw her annual bill jump from just under $1,500 a year to more than $5,000 a year after she got a $32,000 solar panel system installed. At the 7.9% interest rate she agreed to, court records show she will end up paying more than $50,000 over 20 years.

“People think, ‘Wow, I don’t have a bill for a year’ or ‘Wow, I’m going to get a brand new AC’ — until that tax bill comes in,” Fasano said.

In California, media reports found that at least some customers lost their homes after they couldn’t afford the new tax bills. While it appears that foreclosure specifically due to PACE-inflated property taxes hasn’t occurred in Florida yet, consumer advocates urge the state to act soon to prevent them.

Claudia Polsky, the director of the University of California, Berkeley’s environmental law clinic, published a report on PACE and consumer protections in 2021 titled “The Dark Side of the Sun.” In it, she and her team of researchers found that the program creates “economic risk for low-income participants” and “facilitate(s) outright contractor fraud.”

Polsky said the industry lobbied hard against stricter consumer protections in California, but each of the new laws reduced both complaints and lawsuits.

“In our state, every time that new consumer protections go in, PACE initiations decrease,” she said. “The incoherence of industry messaging is really plain. On one hand, they’re saying consumers don’t need these protections. On the other hand, as soon as you protect consumers, they stop being able to do the same sort of sales volume.”

So far, with residential PACE loans in just three states, the federal government also has done little to tighten lending rules, although it began the process of creating rules for residential PACE in 2019.

Since then, the Consumer Financial Protection Bureau has suggested it wants to find a way to hold PACE to similar Truth in Lending standards as banks and mortgage providers, likely by making providers legally liable for violating those standards.

John Rao, an attorney focused on PACE at the National Consumer Law Center, said he expects the bureau to release a draft of proposed new rules sometime this year. From there, it may be another year or more before those rules kick in.

In the meantime, he said, Florida customers who feel misled by PACE lenders or contractors have little legal recourse, and lawsuits face an uphill battle without stronger state laws.

“There are no state statutes that grant these protections to Florida homeowners,” Rao said.

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