Looking to take ownership of the PACE acronym, senators Tom Cotton (R-AR), Marco Rubio (R-FL) and John Boozman (R-AR) are calling their bill the Protecting Americans from Credit Exploitation Act.
The law would essentially require PACE lenders to treat their products as consumer loans rather than tax assessments, subjecting them to the same disclosures rules that are applied to mortgages, namely the Truth in Lending Act (TILA), which falls under the watch of the CFPB.
The rule says that borrowers must be informed of exact expenses and fees related to a mortgage, such as interest rates, monthly payments and closing costs.
The bill proposed by Senators Rubio, Cotton and Boozman appears to show support for broadening consumer protections for PACE borrowers, who they characterize as “low-income and elderly Americans”.
This would be a noble endeavour, were it not for the fact that the Republican party has attacked the CFPB’s broad powers to regulate on behalf of everyday Americans across other areas of consumer credit.
On April 7, two days after the three senators unveiled their bill, fellow congressional Republican, Ann Wagner of Missouri, penned an op-ed in the St.Louis Business Journal titled “CFPB depicts the worst of big government”. In the piece, she rails against “egregious regulations put in place that make it harder for you to qualify for a mortgage, obtain an auto loan and access other forms of credit that families depend on every day.”
Just a few days later, French Hill, another Arkansas Republican, unleashed a tirade against the CFPB and the ‘ability to repay’ rule, in which he called for the agency’s ability to regulate mortgage lending to be curtailed.
So if the stance of the party is to cut back on the powers of the CFPB to regulate financial services companies, then what is the point of the PACE Act? The Republicans want to both defang the Bureau, while at the same time put more of the market within its purview. Something doesn’t add up.
Likely, it all comes down to the fact that PACE is a ‘green’ energy program.
PACE proponents tout its cost savings advantages for consumers, as well as its benefits to the environment via conserving energy and water and reducing the use of fossil fuels.
With a mandate from President Donald Trump, who campaigned on a pro-fossil fuel platform, Republicans are seizing the opportunity to dismantle a decade of policies promoting the use of renewable energy.
The strategy with the PACE legislation seems to be an attempt to tie PACE lenders up in all of the same red tape they claim has hindered the mortgage market. If they cannot ultimately succeed in dismantling the CFPB, then the Republicans can at least try to use the agency to hobble programs like PACE.
This is not to say that PACE is without its flaws. Published reports in The Wall Street Journal and elsewhere have highlighted its shortcomings, which include poor customer service and hidden fees for borrowers, as well as misrepresenting delinquency data to investors buying bonds backed by PACE loans. PACE lenders should be transparent and they should disclose all relevant information to borrowers.
But for Republicans to cry foul about a green energy program, while at the same time calling for a loosening of other more important protections, such as mortgage lending standards, rings completely hollow.