News Express: PACE Financing Faces Comprehensive Regulation
Friday, August 25, 2017
Bulletin 2017/18 - 23
August 25, 2017
Legislation supported by Governor Brown surfaced today that would enact a new Property Accessed Clean Energy (PACE) licensing and regulatory program within the California Finance Lenders Law, creating requirements for persons soliciting PACE loans. Since the inception of the PACE program, numerous cases of abuse related to senior citizens and unwary consumers have been reported throughout California.
Assembly Bill 1284 (Dababneh), would define both a PACE “solicitor” and a PACE “Program Administrator.” In addition, it would define a PACE “assessment contract” as an agreement entered into between all property owners of record on real property and a public agency in which, for a voluntary contractual assessment imposed on the real property, the public agency provides a PACE assessment for the installation of one or more property improvements in accordance with a PACE program. The effective date of the legislation is still to be determined, but in its current form would be effective on January 1, 2018.
A PACE program administrator, defined as “a person administering a PACE program on behalf of, and with the written consent of, a public agency” would be regulated by the California Department of Business Oversight when offering financing secured by a property tax lien. The bill represents a comprehensive regulatory scheme for PACE financing designed to protect consumers, something long overdue in California. While the tax assessment nature of the PACE financing remains unchanged, the entire industry will now be brought under heightened regulatory scrutiny and licensing requirements.
A PACE solicitor, defined as “a person who solicits a property owner to enter into an assessment contract on behalf of a program administrator,” must comply with the new regulatory requirements and any rules adopted by the Commissioner of the Department of Business Oversight. The program administrator must also make sure that the solicitor has a pre-determined minimum net worth and must conduct a background check with the Contractor’s State License Board. A PACE solicitor is prohibited from acting on behalf of a program administrator in soliciting a property owner to enter into an assessment contract without complying with the new law and any rules adopted by the Commissioner.
CLTA has been very proactive on behalf of California consumers over the last several years, urging the Legislature to enact provisions that better protect unwary consumers from the more predatory lending aspects of the program.