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A Reminder that Power Purchase Agreements may be Subject to Consumer Protection Laws

With the growth of residential renewable energy power generation, driven in part by a rise in the use of Power Purchase Agreements (“PPAs”), compliance with consumer laws and regulations is critical. PPAs permit solar services providers to own, operate, and maintain solar systems on a customer’s property, while the customer agrees to purchase the system’s electric output from the solar services provider for a predetermined amount.  A number of recent lawsuits* take issue with how a solar services provider reports the consumer’s PPA to the consumer reporting agencies.  The suits have been filed in federal district courts in California alleging violations of the Fair Credit Reporting Act, the California Consumer Credit Reporting Agencies Act, the California Fair Debt Collection Practices Act, and California’s Unfair Competition Law.

The overarching allegation in these lawsuits is that PPAs are being reported on consumer credit reports as if the consumer took out a loan for the total value of the solar system.  The plaintiffs in these cases assert that the long-term power supply agreements are not loans and should not be reported as such.  They further allege that because the total value of the solar systems can be substantial, their consumer reports are showing significant additional debt, causing their credit scores to decline.

While each of the cases follows a different fact pattern, the common element in four of the five complaints is that consumers signed agreements to have solar panels installed on their homes under PPAs.  The plaintiffs in those cases allege that they did not own any of the equipment and that the agreements were not loans.  They assert that at some point after the agreements were signed, the solar services provider began reporting them as five-digit closed-end loans on the consumers’ credit reports.

In one of the complaints, the plaintiff alleges that they agreed to a direct installment purchase of solar panels for $21,000 in four payments.  The plaintiff claims that more than a year after the final payment was made, the plaintiff’s credit report reflected an ongoing 20-year lease obligation where none existed.

To address the risk of attracting similar lawsuits, solar providers who offer PPAs should review the terms of their agreements and ensure that consumer credit reporting (if any) is in compliance with the terms of those agreements.  Additionally, any reporting or collection activity should be reviewed for compliance with applicable state and federal laws. 

* The following cases are pending:

Chaine v. Tesla Energy Operations, Inc., et al., Case No. 2:20-cv-09082, Central District of California, Los Angeles.

Diaz v. Tesla Energy Operations, Inc., et al., Case No. 2:21-cv-00211, Central District of California Los Angeles.

Lee and Hugo v. Tesla Energy Operations, Inc., et al., Case No. 2:20-cv-11097, Central District of California, Los Angeles.

Lubinsky v. Tesla Energy Operations, Inc., et al., Case No. 4:21-cv-00053, Northern District of California, San Jose.

Yu v. Tesla Energy Operations, Inc., et al., Case No. 2:21-cv-00062, Central District of California, Los Angeles.

© 2022 Foley & Lardner LLPNational Law Review, Volume XI, Number 43
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About this Author

Darin M. Lowder Partner Foley Energy Finance Corporate
Partner

Darin Lowder is a partner and business lawyer with Foley & Lardner LLP. He is a member of the firm’s Finance Practice. Although Darin’s practice extends to all aspects of business law, he currently focuses his practice on energy, project finance, project development, and related tax and public financing. Darin is also a member of the Energy Industry Team.

Darin has experience with numerous project technologies including commercial, utility-scale, and residential-scale solar photovoltaic systems; onshore and offshore wind development; biomass and biofuel projects; and other...

202-295-4084
Christi Lawson, Foley Lardner, Orlando Litigation Lawyer
Partner

Christi A. Lawson is a partner and litigation lawyer in the Orlando office of Foley & Lardner LLP. She has first chair experience representing Fortune 100 companies. Ms. Lawson is a member of the firm's Consumer Financial Services, Labor & Employment and Privacy, Security & Information Management Practices, as well as the Trade Secret/Noncompete Specialty Practice.

407-244-3235
Sharal L. Henderson, Foley, Consumer Finance Lawyer, Transactional Matters Attorney
Special Counsel

Sharal L. Henderson is a special counsel with Foley & Lardner LLP. Her practice focuses on transactional and regulatory matters, with an emphasis on consumer finance law. In addition to being a lawyer, Ms. Henderson is a Certified Public Accountant.

Prior to practicing law, Ms. Henderson gained experience in the finance and accounting fields holding positions as controller, director, and vice-president of financial reporting & accounting. She was also an auditor in a regional public accounting firm where she performed audits of local...

407-244-3263
John J Atallah, San Diego Litigator, Foley & Lardner Law Firm, fraud, misappropriation, breach of contract
Associate

John J. Atallah is an associate with Foley & Lardner LLP, where he has litigated cases in both state and federal courts and represented clients in a variety of fraud, misappropriation, and breach-of-contract disputes. Mr. Atallah has experience in litigating complex commercial and contractual matters on behalf of manufacturers, research institutions, health care plan providers, insurance brokers, financial institutions, and local government agencies. His robust pro bono practice has included the representation of clients in connection with disability rights and immigration matters,...

213-972-4834
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