Many solar loans advertise low monthly payments that assume the homeowner will apply their federal tax credit (ITC) to reduce the loan principal at the end of year one. If you do not apply the credit, the loan balance remains high and interest is calculated on the larger amount — dramatically increasing your long-term cost. This structure is called a dealer fee loan or ITC loan and is used extensively by GoodLeap and similar solar lenders. If this was not disclosed clearly at signing, it may be actionable.
The Loan That Changes After Year One
You were told your solar payment would be $180 per month. A year in, you receive a notice that your payment is now $240 per month — or that you owed a large lump sum that you did not make. What happened?
Many solar loans are structured around the federal Investment Tax Credit. The low payment advertised is calculated assuming you will receive the ITC (30 percent of the system cost) as a tax refund and apply that refund to reduce the loan principal at the end of the first year. If you do not receive the full ITC — because you do not have sufficient tax liability, or you spent the refund, or your accountant handled it differently — the loan principal is not reduced and your payments increase.
Who Uses These Loan Structures
GoodLeap is the largest user of ITC-based solar loan structures. Mosaic, Dividend Finance, and others use similar designs. The structures are not inherently fraudulent, but the disclosure of how they work — and what happens if the ITC is not applied — is frequently inadequate at the point of sale. Sales reps who told you the loan payment was fixed and affordable without explaining the ITC application requirement may have made a material misrepresentation.
What You Can Do
If your payment increased because of the ITC application requirement and this was not clearly disclosed, file a CFPB complaint at consumerfinance.gov/complaint citing failure to clearly disclose loan terms under TILA. File with your state AG under your state consumer protection statute. Consult a consumer attorney about rescission of the loan based on inadequate disclosure.
Trapped in a solar contract?
Our partner attorneys offer free, no-obligation contract reviews. Find out your options in minutes.
Get Your Free Contract ReviewIs Your Solar Contract Trapping You?
Thousands of homeowners are stuck in bad solar deals. Get a free review and find out if you have options.
Get Your Solar Contract Reviewed
Not sure if your deal was structured fairly? Our free review helps you understand your rights and options.
Get Free Contract Review →