Solar energy financing lenders use predatory methods in all states, report shows

And, again, history repeats itself.

The nation’s leading residential solar energy financing lenders are using predatory methods including undisclosed profit arrangements with their preferred installers and expensive financing with hidden fees as a standard practice to target consumers for financial exploitation, according to a new report by the Center for Responsible Lending, a consumer advocacy group. These practices were employed in the subprime mortgage lending market of 2007-2010, one of the main causes of the Great Recession.

The center said this solar debt increases the risk that the borrower will lose their home to bankruptcy or foreclosure. And, in addition, lenders’ installers often perform improper or incomplete solar panel installations that prevent homeowners from receiving the full benefit of reduced fossil fuel usage.

The center’s report, “The Shady Side of Solar System Financing,” found that these harms exist in all states.

Leading solar lenders use door-to-door sales teams that use high-pressure tactics, misleading information about potential energy savings or eligibility for energy tax credits, and confusing contracts that entice consumers to sign solar financing agreements that often leave them in a worse economic situation, the report reveals.

In addition, these teams often use mobile phone applications provided by the lender to qualify borrowers and rush them into signing a financing contract without understanding the terms and fees.

The center analyzed contracts, securities statements, state and federal consumer complaint databases, newspaper articles, and lawsuits involving the nation’s five largest residential solar finance companies. Its analysis found that the business models of companies – GoodLeap, Mosaic, Sunlight Financial, Sunnova, and Sunrun – all replicate the misleading sales practices and predatory financing arrangements formerly used by shady subprime mortgage lenders.

These five companies make up about 80 percent of the residential solar financing market.

About 70 percent of all solar panel that were installed last year were paid for with a solar loan.

As of 2023, 4.4 percent of all residential homes in the United States had solar power systems installed, with Hawaii, California, and Arizona having the largest percentages of homes. From 2022 to 2023, a 51 percent increase in the overall solar market occurred.

Current state and local regulations don’t adequately protect homeowners from abusive actions in the residential solar market, Anneliese Lederer, the report’s co-author and senior policy counsel at the center, said in a statement.

Lederer said policymakers need to prioritize regulatory and enforcement actions to protect consumers – especially the elderly and low- and moderate-income residents in Native, rural, and urban communities – from abusive solar financing tactics.

A critical problem is that typically the price of the solar system is substantially inflated if a consumer finances a system, she said. For solar panels that would cost $20,000 if purchased outright with cash, the price of the panels is increased to $25,000 or more if there’s financing.

Report co-author Andrew Kushner, the center’s senior policy counsel, said that solar financing providers have come under increasing scrutiny with attorneys general in Minnesota, New Mexico, North Carolina, and Texas, and other states seeking to rein in companies that promote deceptive solar system sales and financing practices.

“We need more risk controls and consumer protections built in up front [for solar installations], before rogue installers and predatory lenders can trap consumers in long-term contracts that actually worsen their financial position and provide no reduction in their energy payments,” Kushner said.

The report makes it clear that in a new area of consumer financing, unscrupulous companies have jumped right in to rake in profits from unsuspecting consumers.