Housing

Consumer Groups Urge CFPB to Apply TILA’s Ability-to-Repay Rule to PACE Loans

CFA and 28 other advocacy groups sent a letter to the CFPB urging them to respect the limits of the Truth in Lending Act

 |  Testimony & Comments

Washington, D.C. – The Consumer Financial Protection Bureau (CFPB) recently proposed a rule to implement Section 307 in the Economic Growth, Regulatory RElief, and Consumer Protection Act (Public Law 115-174) regarding Property Assessed Clean Energy (PACE) loans. CFA and other advocacy groups urged Director Kraninger to ensure that they respect the limits on the Bureau’s authority under the Truth in Lending Act (TILA) and other federal statutes.

In the letter, the groups layout four main concerns they have:

  • TILA clearly covers PACE loans. TILA is a comprehensive statute that governs consumer credit and Congress’s inclusion of PACE in TILA removes any doubt that PACE financing is a consumer credit transaction covered by TILA.
  • TILA’s exemption authority does not allow the Bureau to exempt PACE loans from any aspect of TILA. TILA’s exemption provisions offer no leeway to those who would have the Bureau exempt PACE from the statute’s coverage. The statutory factors the Bureau must consider compel the Bureau to apply TILA’s residential mortgage loan provisions to PACE. Relieving PACE creditors from the compliance obligations set out in TILA does not fall within the Bureau’s exemption authority. As a result, such an exemption would be arbitrary and capricious.
  • TILA’s Exemption authority does not allow the Bureau to make adjustments and exceptions to TILA provisions designed to protect borrowers in PACE loan transactions. Because TILA’s purposes relate to enhancing consumer protection and understanding, so that borrowers will be assured meaningful disclosure of credit terms that will help them avoid the uninformed use of credit, removing PACE loans from the purview of TILA’s provisions would run counter to this purpose by diminishing consumer protections.
  • Issuing a proposed rule at this stage would be premature. it is essential that the Bureau delay any proposed rule until the staff have had the opportunity to examine the data, share those findings, and formulate proposals based on both the data and the public’s response to those data. As a data-driven agency, it is incumbent upon the Bureau to ensure that a rulemaking on such a crucial emerging topic has the benefit of considered analysis.