The Federal Trade Commission and State of California are taking action against home improvement financing provider Ygrene Energy Fund Inc. for deceiving consumers about the potential financial impact of its financing, and for unfairly recording liens on consumers’ homes without their consent. The FTC and California allege that Ygrene and its contractors falsely told consumers that the financing wouldn’t interfere with the sale or refinancing of their homes, in many instances relying on high-pressure sales tactics or outright forgery to sign consumers up.
“Ygrene and its sales force deceived consumers about home improvement financing and then stuck consumers with liens that made it difficult to sell their homes,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Our proposed order would require Ygrene to clean up its business practices, monitor its sales force, and help defrauded consumers remove their liens.”
“Ygrene Energy Fund took advantage of hardworking California families, jeopardizing their most valuable asset in the process,” said California Attorney General Rob Bonta. “Today’s settlement holds Ygrene accountable for their misconduct and establishes guardrails to protect property owners from future deception. PACE financing was meant to help families make important home improvements, but the dishonesty of companies like Ygrene has left some homeowners at risk of losing their homes. Before signing a PACE contract, I urge all Californians to familiarize themselves with this program and take the time to understand what it is and, most importantly, what it isn’t.”
A proposed court order would require Ygrene to stop its deceptive practices and meaningfully oversee the contractors who have served as its salesforce. As part of the settlement, Ygrene will be required to dedicate $3 million to provide relief to certain consumers whose homes are subject to the company’s liens.
California-based Ygrene has provided PACE financing, a form of secured home-improvement financing, for clean-energy home improvements in parts of California, Missouri, and Florida. Since 2015, Ygrene has trained home-improvement contractors to market the company’s PACE financing to homeowners as a way to pay for energy upgrades (e.g., solar panels or updated insulation) to consumers’ homes. These sales often happen door-to-door, with contractors approaching consumers in their homes, selling both the energy upgrade and the supposed benefits of Ygrene’s PACE financing.
PACE financing is a relatively new form of financing that relies on the property-tax system to collect payments from consumers. When a consumer uses PACE financing to pay for a clean energy project, a first-priority lien is placed against the consumer’s home, and the payments on the financing are collected through the homeowner’s property-tax bill. Failing to pay could subject a consumer to foreclosure on the property itself.
The FTC and California allege that Ygrene recruited and authorized home-improvement contractors, whom Ygrene did not adequately train or oversee, to sell its financing, leading to many consumers being deceived during the sales process and being unfairly subjected to liens on their homes without their express, informed consent. Specifically, according to the FTC and California, Ygrene and its contractors harmed consumers by:
- Deceiving consumers about PACE’s impact on home sales: The complaint alleges that Ygrene or its contractors provided false or misleading information that the lien placed on their home as a result of PACE financing could simply be transferred with a property when it was sold. In fact, many mortgage lenders will not provide financing to buy a property unless the PACE lien is paid off in full.
- Deceiving consumers about PACE’s impact on refinancing: In many cases, the complaint alleges, Ygrene or its contractors told consumers that the PACE lien would not interfere with their ability to refinance their homes. As with home sales, many lenders will not approve new financing until the PACE lien has been removed.
- Trapping consumers with PACE liens without clear consent: In many cases, Ygrene relies on an electronic signing system for its financing agreements with consumers. In some of these cases, the complaint alleges, Ygrene’s contractor sales practices have prevented consumers from meaningfully reviewing or consenting to key disclosures concerning the PACE lien. Contractors have rushed consumers through the electronic signing of the financing agreement, which appears in small print and is often presented to the consumer on a mobile phone or handheld tablet device – in many cases owned by the contractor – with a small screen that adds difficulty to navigating and understanding the agreement. In other cases, the contractor has forged the consumer’s signature by e-signing the contract without the consumer’s authorization. The complaint notes that even in some instances after Ygrene has received an electronic signature and has called the consumer to explain the terms of the agreement, the company has failed to ensure that it was speaking to the consumer or that the consumer has given clear consent to the lien.
Ygrene has agreed to a proposed court order with the FTC and California that would require it to stop violating the FTC Act and the California Unfair Competition and False Advertising Laws. The court order would require Ygrene to:
- Stop deceiving consumers: The order would require Ygrene to stop deceiving consumers about the transferability of the PACE financing obligation to the new owner in the event of a sale, the impact of PACE financing on the sale or refinancing of a home, or whether a home will be used as collateral in PACE financing.
- Closely monitor contractors: Ygrene would be required to create a program to closely monitor the actions of contractors who sell their financing products, to ensure they do not deceive consumers and do not forge consumers’ signatures on finance agreements. The order would also require Ygrene to investigate and act on consumer complaints about its contractors.
- Ensure that it has properly obtained consumer consent: The order would require Ygrene to obtain the consumer’s express, informed consent before causing the consumer’s property to be used as collateral to secure PACE financing.
- Conduct a lien-release process or provide refunds to consumers: The order would require Ygrene to send a survey to consumers with outstanding liens to determine whether the consumer personally signed the financing documents or authorized them to be signed by someone else. Survey responses and Ygrene documentation may be reviewed by a settlement administrator. The order would require Ygrene to establish a $3 million fund that could be used to release the liens placed on consumers’ homes without their consent. If the cost of releasing the liens is less than $3 million, the order would require Ygrene to provide the remaining funds to the FTC to be used to redress consumers harmed by practices alleged in the complaint.
The Commission vote authorizing the staff to file the complaint and stipulated final order was 4-0. The FTC filed the complaint and final order/injunction in the U.S. District Court for the Central District of California.
NOTE: The Commission files a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the Commission that a proceeding is in the public interest. Stipulated final injunctions/orders have the force of law when approved and signed by the District Court judge.