The Federal Trade Commission and the State of California are taking action v. housing finance provider Ygrene Energy Fund Inc. for misleading 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 suppliers falsely told consumers that the financing would not interfere with the sale or refinance of their homes, in many cases relying on high-pressure sales tactics or outright counterfeiting to get consumers to sign up.
“Ygrene and her sales team misled consumers about home financing and then placed consumers in foreclosures that made it difficult to sell their homes,” said Samuel Levine, director of the FTC’s Office 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 hard-working California families and put their most valuable assets at risk,” said California Attorney General Rob Bonta. “Today’s settlement holds Ygren accountable for their wrongdoing and creates a guardrail to protect property owners from future fraud. PACE funding was supposed to help families make important home improvements, but the dishonesty of companies like Ygrene has caused some homeowners to lose their homes. Before signing on to PACE, I encourage all Californians to familiarize themselves with the program and take the time to understand what it is and, most importantly, what it is not.”
Proposed injunction would require Ygrene to cease its fraudulent practices and meaningfully supervise the suppliers who served as its vendors. As part of the settlement, Ygrene will be required to contribute $3 million to provide assistance 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 improvements to homes in parts of California, Missouri and Florida. Since 2015, Ygrene has been training home improvement contractors to offer PACE financing to homeowners as a way to pay for energy upgrades (such as solar panels or updated insulation) to consumers’ homes. These sales often take place door-to-door, with suppliers approaching consumers in their homes and selling both the energy upgrade and the supposed benefits of Ygrene 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 on the consumer’s home and financing payments are collected through the homeowner’s property tax bill. Failure to pay could expose the consumer to foreclosure on the property itself.
The FTC and California allege that Ygrene hired and authorized home improvement contractors that Ygrene did not adequately train or supervise to sell its financing, resulting in many consumers being defrauded during the sales process and unfairly exposed to liens on their homes without their express, informed consent. Specifically, according to the FTC and California, Ygrene and its suppliers harmed consumers by:
- Deceiving consumers about the impact of PACE 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 the PACE financing could simply be transferred with the property when it was sold. In fact, many mortgage lenders will not provide financing for the purchase of a property unless the PACE lien is paid off in full.
- Misleading consumers about the impact of PACE on refinancing: In many cases, the complaint alleges, Ygrene or its suppliers 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 is removed.
- Trapping consumers with PACE liens without clear consent: In many cases, Ygrene relies on an electronic signature system for its financial agreements with consumers. In some of these cases, the complaint alleges that the sales practices of Ygrene’s suppliers prevented consumers from meaningfully reviewing or consenting to key PACE lien information. Suppliers have expedited consumers by electronically signing the financing agreement, which is in small print and is often presented to the consumer on a mobile phone or pocket tablet – in many cases owned by the supplier – with a small screen that makes it difficult to navigate and understand the agreement. In other cases, the contractor forged the consumer’s signature by electronically signing the contract without the consumer’s permission. The complaint states that even in some cases, after Ygrene received an electronic signature and called on the consumer to explain the terms of the contract, the company did not ensure that it spoke with the consumer or that the consumer gave clear consent to the lien.
Ygrene agreed to a proposed injunction with the FTC and California that would require it to stop violating the FTC Act and California’s unfair competition and false advertising laws. The injunction would require Ygrene to:
- Stop misleading consumers: The regulation would require Ygrene to stop misleading consumers about the transferability of the PACE financing obligation to a new owner in the event of a sale, the impact of the PACE financing on the sale or refinancing of the home, or whether the home will be used as collateral in the PACE financing.
- Keep a close eye on suppliers: Ygrene would have to create a program to closely monitor the actions of suppliers who sell its financial products to ensure that they do not mislead consumers and forge consumer signatures on financial agreements. The regulation would also require Ygrene to investigate and act on consumer complaints against its suppliers.
- Make sure the consumer’s consent is properly obtained: The order would require Ygrene to obtain the consumer’s express informed consent before the consumer’s property is used as collateral to secure PACE financing.
- Carry out a lien release process or provide compensation to consumers: The regulation would require Ygrene to send a survey to consumers with outstanding liens to determine whether the consumer personally signed the financial documents or authorized someone else to sign them. Responses to the Ygrene survey and documentation may be reviewed by the Settlement Administrator. The regulation would require Ygrene to establish a $3 million fund that could be used to release 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 remedy consumers harmed by the practices alleged in the complaint.
The commission voted to authorize the employees to file a grievance and set the final tally 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 the proceeding is in the public interest. Stipulated final writs/orders have the force of law when approved and signed by a district court judge.