Federal Court Confirms PACE Loans Are Subject to the Truth in Lending Act — A Major Victory for Consumers
In a landmark decision, the United States District Court for the Middle District of Florida upheld the Consumer Financial Protection Bureau’s (CFPB) authority to apply the Truth in Lending Act (TILA) to residential Property Assessed Clean Energy (PACE) financing.
In Building Resilient Infrastructure & Developing Greater Equity, Inc. v. Consumer Financial Protection Bureau, Case No. 8:25-cv-1367 (M.D. Fla. 2026), the court rejected a broad industry challenge and confirmed that PACE loans constitute “credit” under federal law and are therefore subject to TILA’s consumer protection framework.
For consumers, this ruling is enormously significant. It confirms that PACE lenders and administrators can be held accountable under federal lending laws — including the powerful civil liability provisions of TILA.
What Is PACE Financing?
PACE (Property Assessed Clean Energy) financing allows homeowners to fund improvements such as:
- Solar panels
- Energy-efficient roofing
- Impact windows and doors
- HVAC systems
- Storm hardening upgrades
Instead of making traditional monthly loan payments, homeowners repay the financing through an assessment added to their property tax bill — often over 5 to 30 years.
In Florida and California, PACE has become a widely used financing mechanism for home improvement projects. However, its structure — particularly the “super-priority” lien status attached to the property — has long raised consumer protection concerns.
The Core Legal Question: Is PACE a “Tax” or a “Loan”?
The PACE industry argued that because repayment occurs through a property tax assessment, PACE obligations are “taxes,” not consumer credit — and therefore outside the scope of TILA.
The federal court rejected that argument.
The Court held:
- PACE financing is voluntary.
- It arises from a contractual agreement.
- It grants a homeowner the right to incur debt and defer repayment.
- The homeowner bears the obligation and risks foreclosure for nonpayment.
In other words, PACE is credit — not a tax.
The Court emphasized that focusing solely on the collection mechanism (property tax billing) ignores the underlying transaction: a financed home improvement loan voluntarily entered into by the homeowner.
This conclusion triggered full application of TILA and Regulation Z
Why This Ruling Is So Important for Consumers
Creditors must make a reasonable, good-faith determination that the consumer can repay the loan.
This is critical because PACE assessments:
- Can dramatically increase property tax bills.
- May cause escrow shortages.
- May increase mortgage delinquency risk.
- May complicate refinancing or sale of the home.
The CFPB relied on data showing higher mortgage delinquency rates among PACE borrowers. The Court upheld the Bureau’s reliance on that data and found its conclusions reasonable under the Administrative Procedure Act.
2. TILA-RESPA Integrated Disclosures (TRID)
PACE transactions must now provide:
- Loan Estimate forms
- Closing Disclosures
- Clear cost and APR disclosures
- Waiting periods
This ensures consumers understand:
- Total cost of financing
- Interest rates
- Payment structure
- Long-term financial impact
3. Civil Liability Under TILA
Perhaps most importantly, the Court confirmed that TILA’s civil liability provisions apply to PACE transactions.
That means consumers may:
- Bring private lawsuits for violations
- Seek statutory damages
- Recover actual damages
- Recover attorneys’ fees
Without TILA coverage, many homeowners would have been left with only patchwork state-law remedies.
This decision ensures uniform federal protections
The Court Also Rejected Tenth Amendment and Regulatory Challenges
The PACE industry argued that applying TILA violated state sovereignty and improperly interfered with state taxing power.
The Court rejected those arguments, holding:
- PACE is not taxation in the constitutional sense.
- It is a voluntary credit transaction.
- Federal consumer protection laws validly apply.
The Court also dismissed claims that the CFPB acted arbitrarily or exceeded its statutory authority.
In short, the Rule stands.
What This Means Going Forward
This ruling is a major development for homeowners in Florida and other PACE states.
It confirms:
- PACE lenders are not above federal lending law.
- Consumers have enforceable federal rights.
- Ability-to-repay standards apply.
- Mandatory disclosures apply.
- Civil liability provisions apply.
For years, homeowners facing foreclosure, escrow shock, or refinancing barriers argued that PACE financing operated outside traditional lending safeguards.
This decision firmly places PACE within the TILA framework — where Congress intended consumer credit protections to apply
If You Have a PACE Loan
Homeowners who:
- Were not properly underwritten
- Did not receive required disclosures
- Were misled about repayment terms
- Experienced escrow shortages or delinquency issues
may now have strengthened federal claims under TILA.
Because TILA provides fee-shifting and statutory damages, it creates meaningful accountability mechanisms — not just regulatory oversight.
Conclusion
The Middle District of Florida’s decision represents a watershed moment in consumer finance law.
By confirming that PACE financing is “credit” under TILA, the Court ensured that homeowners receive the same federal protections afforded to other mortgage-related borrowers.
For consumers seeking to hold PACE lenders accountable, this ruling provides a powerful legal foundation.
If you have questions about your rights under TILA or concerns about a PACE loan, experienced counsel can evaluate whether federal remedies may be available.
Legal Rebels Law, founded by Joshua S. Horton, Esq., represents homeowners and consumers in complex lending and financial litigation matters throughout Florida.
Disclaimer
This article is provided for informational and educational purposes only and does not constitute legal advice. The discussion of Building Resilient Infrastructure & Developing Greater Equity, Inc. v. Consumer Financial Protection Bureau, Case No. 8:25-cv-1367 (M.D. Fla. 2026), is intended as a general summary of the Court’s ruling and its potential implications.
Reading this article does not create an attorney-client relationship between you and Legal Rebels Law or any of its attorneys. Every legal matter is fact-specific, and outcomes may vary depending on the particular circumstances involved.
If you have questions about a PACE loan, the Truth in Lending Act, or your individual legal rights, you should consult with a qualified attorney regarding your specific situation.