Regulators Could Turn Up Heat on Solar Energy Providers
As solar product offerings become more expansive and financing options more creative, consumer complaints will grow, and the Consumer Financial Protection Bureau will take notice.
Las Vegas, NV, October 6, 2015 (Newswire.com) - For the solar industry this could be only the beginning of state and federal oversight and regulation. Efforts by industry insiders and solar trade associations to make parameters for self regulation are a well intentioned, according to compliance expert Bobby Lazenby of Lazenby & Associates, but won’t keep regulators at bay.
“We fully expect solar regulation to take a similar regulatory course of other financial service product providers,” said Lazenby.
Three years ago members of the financial services industry were introduced to the Consumer Financial Protection Board (“CFPB”). At that time the CFPB was just being formed and industry insiders struggled to determine if and how the agency oversight might impact the financial services industry. From the onset the CFPB seemed to be writing the rules as they pieced together the agency. Which made understanding what the CFPB wanted and from who difficult to discern. After the CFPB’s first year of operation their agenda became more clear, now the question for financial services companies was what to do about it. Financial services industry leaders discussed and debated the issue at length with little concrete direction to go on.
Without a consensus on how to proceed, a few companies thought it prudent to address the necessary changes to satisfy, and even exceed the CFPB’s primary concerns. Other companies took issue. They were certain if they invited the CFPB into the industry and made them more familiar with the industry and a few of its operators the CFPB would see their efforts were misdirected, and realize additional regulation and oversight would not be necessary.
In fact, many predicted, the CFPB would find the industry's existing policies and procedures to be a model for other industries, self regulation at least in this industry works, consumer’s were already being fairly represented by existing state and federal rules and regulations. Well, that was many settlement agreements ago, and hundreds of million’s in fines have since been paid to the CFPB with no end in sight.
“If ignorant both of your enemy and yourself, you are certain to be in peril” ~ Sun Tzu
Working in tandem with the Department of Justice (“DOJ”) and its subpoena power, the Consumer Financial Protection Bureau (“CFPB”) has levied hundreds of millions in fines over the past three years against bank and non-bank financial services company’s. Who are these companies that have acted so egregiously in the eyes of the CFPB? Some of the biggest banks and finance companies in the United States. To the tune of Citi Bank $700mm, G.E. Capital $225mm, Citi Group $770mm, Regions Bank $7.5mm and many more. Keep in mind, all of these companies have robust risk management groups and compliance departments, the likes of which make the most sophisticated solar company look like its operating out of a closet in mom’s basement. Still think it can't happen to solar?
According to legal & regulatory compliance expert Steve Levine Esq. proponents of self regulation for the solar industry are well intentioned but naive. “The bare fact is while solar products unquestionably benefit the environment, are popular on Capital Hill and bring down utility costs for tens of thousands of American homes, solar providers won’t get a hall pass on how the industry markets and finances solar products to consumers. Further, the likelihood that there are “only a few bad actors selling solar” as offered by solar insiders, is it-self likely a gross understatement,” said Levine,
Within the hyper-competitive landscape of selling rooftop solar there are ever-creative marketing practices being developed and deployed with the goal of bringing solar to every rooftop in America.
According to financial services compliance expert Bobby Lazenby, “the level of demand and competition we are seeing in solar inevitably lends itself, not to just shady business practices, but incorrect, incomplete or inadequate business practices”.
Many of the solar industry’s marketing efforts are being carried out by lead generation or direct sales marketing companies, and various types of re-sellers or assigner’s of solar agreement’s, which by the way, makes the purchaser of the solar agreement the responsible party for the representation made by the seller. Every purchaser and marketer of solar should clearly understand where their liability starts and stops. Be forewarned, the CFPB will move that line without hesitation if they believe the current rules don’t best represent the solar consumer. "Use common sense. Disclosures alone will not insulate or protect a company from the liability of unfair business practices," according to Levine
“The solar industry as a whole should not waste time with well intentioned efforts of promoting self regulation. It's very unlikely to happen. The earlier you get on board and revise your compliance policies and procedures to meet or exceed the impending federal requirements, the sooner you will be able to focus on growing your business without looking over your shoulder. It's that simple” said Bobby Lazenby.
According to Lazenby, “as solar product offerings become more expansive and financing options more creative, consumer complaints will rise, and the CFPB will take notice”.
The CFPB has spent the several years developing an online portal that allows consumers to lodge complaints directly into the CFPB database. From there the complaints are monitored, grouped by industry and company. The website has an open access for all interested parties. http://www.consumerfinance.gov/complaint/.
According to the CFBP web site “We forward the information you provide so the company can identify you and address your issue. We also share complaint data with state and federal agencies who oversee financial products and services, and we publish a database of non-personal complaint information so the public knows what kinds of complaints we receive and how companies respond”.
Further, the CFPB has entered into an information sharing arrangement with most state Attorney Generals and regulators, so complaints filed by consumers at the state level find their way up the chain and shared cross-agency with other regulatory bodies. Perhaps most significantly, these complaints can be made in narrative format by the consumer, meaning the consumer can say whatever they like, apparently there is no fact checking or other controls prior to the complaint being posted online and becoming part of the public forum that identifies companies by name. In this respect, it’s a little like Yelp, but it carries the credibility of appearing on the website of a governmental authority.
If they have not already, the CFPB will soon take notice of the inner workings of the solar industry, such as how are these products sold, who provides financing, at what costs to the consumer and how clearly costs are being communicated to the consumer. Other areas of interest could be manufactures of products being sold the related warranties. What, if any, ancillary products are offered? What is the approval vs. decline rates, how are customers paying for their purchase and who is collecting the payments and at what cost to the consumer? How are solar companies maintaining and responding to consumer complaints.
The latest CFBP tool is “disparate impact”. It sounds like a Matt Damon sci-fi thriller.
“Disparate Impact is a legal doctrine under the Fair Housing Act, which states that a policy may be considered discriminatory if it has a disproportionate “adverse impact” against any group based on race, national origin, color, religion, sex, familial status, or disability when there is no legitimate, non-discriminatory business need for the policy”. Steve Levine, Esq.
Meaning members of groups of protected classes are paying more for the cost of products or financing. The data suggests it happens across various industries where products are sold and financed. The likelihood is high it’s happening in solar as well when using the CFPB model as a measurement tool.
The CFBP might also take notice of who you're doing business with, advertising relationships, account services, technology providers, payment processing and collection agencies. Similar tactics are already being utilized by the CFPB against the mortgage, credit card, student loan, payday lending, automobile finance, collections, and other industries. The CFPB has recently entered into consent decrees with American Honda Finance, Fifth Third Bank, and others over allegations related to disparate impact. It’s heavy reading, but a must read to better understand the current landscape.
One thing seems clear, poor compliance management has become an expensive business practice for many. According to Lazenby “the best advice is to get informed and have meaningful discussions about risk management practices and mitigation strategies with the board of directors. Getting the board informed will help manage its way through the new normal that can be heavy-handed regulation".
For more information, contact: Bobby Lazenby CFE or Steve Levine Esq. Lazenby & Levine represent the Risk Management Firm of Lazenby & Associates. To learn more, visit www.lazenbyassociates.com