In today's episode of the Consumer Finance Monitor Podcast Show, our host, Ballard Spahr's Alan Kaplinsky, was joined by colleagues Steven Burt and Melanie Vartabedian to explore a rapidly evolving and increasingly complex area of consumer financial services: residential solar finance.

Building on prior discussions of the broader solar finance landscape, this episode zeroes in on the regulatory and litigation developments that are reshaping the residential solar market in real time. The discussion highlights how an industry that experienced explosive growth over the past decade is now facing heightened scrutiny from regulators, enforcement agencies, and private litigants alike.

From Rapid Growth to Market Headwinds

As Steven explained, the residential solar industry expanded dramatically between 2015 and 2022, driven by:

Federal and state tax incentives
Declining equipment costs
Innovative financing models
Aggressive direct-to-consumer sales strategies

Growth peaked around 2023, but the market began to slow in 2024 and beyond due to several converging factors:

Changes to net energy metering policies (particularly in California)
Rising interest rates impacting financing affordability
Supply chain constraints
Increased emphasis on battery storage solutions
Federal policy shifts, including reduced support for renewable energy and changes to tax credits

These developments have forced industry participants to adapt quickly—often while still operating under legacy business models that are now attracting scrutiny.

A Surge in Government Investigations and Enforcement

One of the most significant themes discussed in the podcast is the sharp rise in government scrutiny.

State attorneys general and consumer protection agencies across the country have launched investigations and enforcement actions targeting:

Direct-to-consumer sales practices
Marketing representations about energy savings and tax benefits
Long-term financing structures, particularly loan-related fees

A notable inflection point came in 2024, when the Consumer Financial Protection Bureau (CFPB) issued a spotlight on solar financing, identifying risks such as:

Alleged "hidden" dealer or platform fees
Misleading claims regarding tax credits
Misrepresentations about system performance and savings

Since then, enforcement activity has expanded across numerous states, with additional investigations ongoing. Notably, even local regulators—such as New York City's Department of Consumer and Worker Protection—have begun to assert jurisdiction, signaling a broader and more aggressive enforcement landscape.

Private Litigation: Class Actions and the "Dealer Fee" Controversy

Parallel to government activity, private litigation has surged. Melanie Vartabedian highlighted two major waves of litigation:

1. Earlier Cases: Sales Practices

Initial lawsuits focused on:

Unauthorized credit checks (FCRA claims)
High-pressure or deceptive sales tactics
Misrepresentations about tax savings and energy production

2. Current Wave: Financing Structures

More recent cases center on dealer fees (also called platform or financing fees), with plaintiffs alleging that:

· These fees are effectively hidden finance charges

· They should be disclosed under the Truth in Lending Act (TILA)

Courts in Minnesota have allowed these claims to proceed past motions to dismiss, rejecting arguments—at least at the early stage—that such fees are merely "seller's points" exempt from disclosure.

While these rulings are preliminary, they have:

· Opened the door to costly discovery

· Encouraged additional class actions and enforcement cases

· Created significant uncertainty regarding how courts will ultimately resolve the issue

The Expanding Role of the FTC Holder Rule

Another important litigation risk involves the FTC Holder Rule, which allows consumers to assert claims against loan holders that they could assert against installers.

This creates potential exposure for:

· Lenders

· Secondary market participants

· Securitization investors

Although liability is generally capped at the amount of the loan, the rule can still create substantial risk, especially where plaintiffs seek rescission of contracts.

Practical Guidance for Industry Participants

The speakers emphasized that companies operating in the residential solar space must take proactive steps to manage risk. Key recommendations include:

1. Strengthen Compliance and Oversight

Conduct comprehensive reviews of sales and marketing practices
Ensure clear, accurate, and compliant disclosures
Align legal and compliance teams with customer service functions to identify emerging issues early

2. Enhance Dealer and Partner Management

Perform rigorous upfront diligence on third-party installers and sales organizations
Implement ongoing monitoring and auditing
Act quickly to address complaints or misc...