Missouri Governor Mike Parson signed into law on Tuesday new consumer protection measures for the clean energy lending program it drew criticism that it disproportionately harms borrowers in predominantly black areas.
The legislation, sponsored by Republican Representative Bruce DeGroot of Ellisville, targets a clean energy property assessment program or the PACE program.
According to the bill, the program will be reviewed by the State Treasury Department at least once every two years.
It requires tenant borrowers to be provided with full information about the potential consequences of their loan, including a notice that their home could be sold as a tax sale if they do not repay the loan. It also limits the amount that can be provided under the program based on the assessed value of the home and existing debt.
PACE provides loans to cover energy efficiency or renewable energy costs in a home, with homeowners paying off the loans by increasing property taxes. Supporters of the program say it has helped people who would otherwise not have been able to qualify for a loan to improve their homes.
But an investigation earlier this year by non-profit news organization ProPublica found that Missouri’s PACE programs charge high interest rates for up to 20 years, using the government’s tax authority to collect loan payments through tax accounts and collect debt through liens.
By touting their programs to people in urgent need of renovation but few credit options, critics argue that they have disproportionately burdened some of the state’s most vulnerable homeowners.
ProPublica found that 28% of borrowers in predominantly black areas are at least a year behind their PACE loans, compared with 4% in predominantly white areas. Borrowers from predominantly black areas also paid a larger share of their home’s value in interest and fees, sometimes more than the county’s appraisers said their homes were worth.