State legislation has been passed to tighten protections for homeowners participating in California’s Property Assessed Clean Energy Program (PACE).

On Oct 4, Governor Jerry Brown signed a bill into action, AB 1284, in response to consumer complaints about the way operators of the program target homeowners and requires more transparency.

Federal legislation to also tightened controls on the lending practice is still under review.

Under property-assessed clean energy, or PACE, lending programs the cost of various improvements such as energy-rated water heaters, windows, and solar panels can be repaid through annual payments on property tax bills.

The new law establishes requirements for properties that qualify for PACE assessments, including limits on the amount of financing based on the property’s value.

PACE administrators will also be required to enroll, train and monitor the activities of home improvement contractors and salespeople that act on their behalf (known as “PACE solicitors”).

The law will also direct PACE administrators to determine a property owner’s ability to pay the annual payment obligations of a PACE assessment before a lien is placed on their property.

“The provisions in this new law are important to ensure consumers are not being taken advantage of by PACE solicitors or PACE administrators and to eliminate unscrupulous activity that has come to light through recent reports,” said Assembly member Matt Dababneh, who introduced the law. “By providing these new protections, we are able to help protect homeowners so they are not unknowingly committing to a contract when they are not able to fulfill their financial obligation, potentially costing them their home.”

In addition to including new consumer protections, the law will authorize the Department of Business Oversight to regulate the activities of PACE administrators.

The bill also gives the state authority to go after companies that make false representations about the program. Before, the only option available to a consumer who had encountered difficulties with the PACE Program was to file a lawsuit. This new law gives consumers another option by allowing them to file a complaint with DBO, who can work to resolve the issue at hand.

The law also includes new “ability to pay” underwriting requirements. PACE administrators can no longer base a PACE assessment solely on the equity in someone’s home. They will now be required to verify the property owner’s income, assets, and debt obligations using credible sources, such as IRS documents and credit reports, similar to traditional real estate lenders.