Homeowners considering adding solar panels to their property to increase energy efficiency and reduce costs need to be very careful when presented with sales pitches for purchase and installment of such panels. Door-to-door salespeople pitching a solar panel system to homeowners may put pressure on homeowners to sign an electronic contract that they have not seen before, and the consumer faces the risk of signing an agreement that is very different than expected.
Consumers may find that the costs are much higher than expected and include additional fees, pre-payment requirements, and a lesser savings in energy costs than they were told. The hope of improving their home and decreasing energy costs to better provide for their families may result in financial devastation, and the targets of such victimization include elderly, disabled, or persons with limited English proficiency.
Andrew Milz of Flitter Milz, PC, a leading consumer attorney who practices in Northeast Pennsylvania, presented information on such fraud to NPLS advocates earlier this year and cautioned that consumers and consumer advocates to need to be aware of the tactics that may be used by salespeople. NPR reported recently that the rising reports of fraud in this industry are threatening the momentum of clean energy improvements, and highlighted one of Attorney Milz’s Pennsylvania cases. (See: Rooftop solar is good for the environment but has a fraud issue: NPR)
The Consumer Financial Protection Bureau (CFPB) issued a Solar Financing Report on August 9, 2024 which highlights the risks stemming from “solar specific” financing models created from financial technology firms who have relationships with solar installers who initiate the sale. The report details four risks which, in addition to aggressive sales tactics, make the contracts potentially harmful to consumers.
Hidden Fees
When told what the cost of privately financing the solar panel will be, the homeowner will be told a cash price plus the interest rate. But beware additional fees when you look at a solar contract. Sometimes referred to as a “program”, “dealer”, or “finance” fee, these fees may add 20-30% to the cost of the loan according to the CFPB, and sometimes even higher. When comparing loans with different companies, make sure you know all the costs for a true comparison.
Misleading Statements about Federal Tax Credits
Consumers can get a solar tax credit of up to 30% of the cost of clean energy improvements through 2032. The IRS explains that this credit is available only for the “main home” you own or rent, and that it is a nonrefundable credit. This means that you can only claim the credit up to the amount of income that you report. (See: IRS Residential Clean Energy Credit.)
According the CFPB, the financing terms may be misleading because the lender will put in bright letters that highlight the “Net System Cost” which subtracts the estimated tax credits. The actual loan amount will appear in light font and not highlighted. However, consumers may not be eligible for the tax credit because they don’t have taxable income. Although the tax credit carries forward, the homeowner may never get the tax credit because they are retired and live on a fixed income. So, the total cost is much higher than they expected because the tax credit is not available in full or at all the consumer. (See: Clean Energy Scams Exploit The ‘Green Halo’ (aarp.org))
Misrepresentations and Omissions Concerning Prepayments
The CFPB reports that many loans have a prepayment requirement in about the 19th month of the contract of about 30% of the loan. This requirement is based upon the expectation that the consumer will receive the IRS tax credit. However, there are two big problems with this approach. Often, the contract is signed with salespeople on a tablet and consumers never really see the fine details, and complaints have been filed by consumers saying that this was never explained or reviewed. In addition, since this is a nonrefundable tax credit, the salesperson and lender do not know if the purchaser will be eligible for the credit. If the consumer doesn’t make the prepayment, the monthly payment amount will increase dramatically as the loan will be re-amortized to include that amount.
Misrepresentation of Financial Benefits and Targeting Certain Consumers
Consumers complain that they were told the system would pay for itself but they did not see such savings compared to the cost of the solar panel installation. Some contracts require payment regardless of the quality of the performance, and salespeople may overestimate the amount of energy produced or the cost saved over time.
In addition, the CFPB notes over 8.4 million people received mail solicitations for solar panels including financing information, and that those over age 60 receive more than one-third of those solicitations. Seniors are more likely than younger consumers to finance the purchase than pay cash. In addition, there are reports of salespeople soliciting homeowners in Spanish, but providing only written materials (or electronic documents) in English.
The benefits of solar power can be significant and there are a number of options for participating in solar power opportunities. As with any large purchase, we encourage consumers to take their time, insist on receiving documents in advance of signing, and get several quotes before making any final decision.
According to Attorney Milz, the presence of a fake email address on contract documents is a tell-tale sign of fraud. Pennsylvania has protections for door-to-door sales that include a three day right to rescind the contract, and the notice of that right must be given in the language of the sale. Unfair Trade Practices and Consumer Protection Law, 73 PA § 201.7 (See: Unfair_Trade_Practices_Consumer_Protection_Law.pdf (attorneygeneral.gov)). Consumers may also have claims under the Fair Credit Reporting Act, 15 U.S.C §1681, common law fraud, or other statutes if they have been a victim of fraud or other illegal practices. Complaints to the CFPB about financial products and services can be submitted online: Submit a complaint | Consumer Financial Protection Bureau (consumerfinance.gov). Complaints to the Pennsylvania Attorney general can be filed or referred online here: Submit a Complaint – PA Office of Attorney General.
