Recently the CFPB issued an Advance Notice of Proposed Rulemaking (ANPR) relating to residential Property Assessed Clean Energy (PACE) financing. Comments are due May 7, 2019.
The Economic Growth, Regulatory Relief, and Consumer Protection Act (the Economic Relief Act) amends TILA to mandate that the Bureau prescribe certain regulations relating to PACE financing. The new PACE financing rules must: 1) carry out TILA’s ability-to-repay (ATR) requirements with respect to PACE financing; and 2) apply TILA’s general civil liability provision for violations of the ATR requirements that the CFPB will prescribe for PACE financing. In advance of this required rulemaking, the CFPB solicits information related to the PACE financing market.
With respect to the first objective, the Bureau’s rules must carry out the purpose of TILA’s ATR requirements, which prohibit a creditor from making a loan unless they made a reasonable and good faith determination that the consumer can reasonably repay the loan according to its terms, including all applicable taxes, insurance, and assessments. The purpose of the ATR requirement is to assure that consumers are offered and receive loans on terms that are not unfair, deceptive, or abusive, and reflect their ability to repay the loans. The CFPB must also implement regulations that apply TILA’s general civil liability provision concerning violations of the ATR Rules to PACE financing. In other words, if a creditor makes a PACE loan that does not comply with the ATR rules, they will be subject to TILA liability.
Specifically, the CFPB is seeking comments on five categories of information: 1) written materials associated with PACE financing transactions; 2) descriptions of current standards and practices in the PACE financing origination process; 3) information relating to civil liability under TILA for violations of the ATR requirements in connection with PACE financing, as well as rescission and borrower delinquency and default; 4) information about what features of PACE financing make it unique and how the Bureau should address those unique features; and 5) views concerning the potential implications of regulating PACE financing under TILA.