Key Points

  • The Eleventh Circuit held that Property Assessed Clean Energy loans are consumer credit transactions under the Truth in Lending Act, so the CFPB could regulate them under its general rulemaking authority.
  • The court held that section 307 of the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act did not limit the bureau to the ability-to-repay and civil-liability provisions and was not rendered superfluous by the rule.
  • The court held that the bureau's reliance on its PACE report was not arbitrary or capricious despite challenges to the control group, pre-reform data and unmatched credit records.
  • The court held that the rule does not infringe state taxing authority because the programs facilitate debts, not taxes, and does not commandeer states because it regulates governments and private companies evenhandedly.
  • The court affirmed summary judgment for the bureau, dismissed the preliminary-injunction appeal as moot and declined to reach a forfeited small business review panel argument.

A federal appeals court on Nov. 13 upheld a Consumer Financial Protection Bureau rule that brings Property Assessed Clean Energy loans, home-improvement loans that homeowners repay through their property tax bills, under the federal Truth in Lending Act. The court rejected an industry group's argument that the loans are taxes beyond the bureau's reach.

A three-judge panel of the U.S. Court of Appeals for the Eleventh Circuit affirmed summary judgment for the bureau from the U.S. District Court for the Middle District of Florida. Chief Judge William Pryor wrote for the panel, which included Circuit Judges Grant and Luck, and no judge wrote separately. "Although loan payments are collected through tax bills, the loan programs facilitate debts, not taxes," Pryor wrote.

The decision leaves intact a rule the bureau published in early 2025 and set to take effect March 1, 2026. The rule ends an exemption that had long kept the loans outside federal lending law and requires lenders to verify that borrowers can repay. Because the local governments that make the loans are immune from suit under the act, the rule extends civil liability to private companies "substantially involved in making the credit decision."

The challenger, Building Resilient Infrastructure & Developing Greater Equity, Inc., is a trade organization that advocates for companies involved in the loans. It sued under the Administrative Procedure Act.

Under the programs, a local government pays for improvements such as solar panels, impact windows and energy-efficient roofs, then collects repayment with interest through the property tax system. The loans most often run 20 years, and a bureau report found they carry "relatively high interest rates compared to primary mortgages." They are secured by liens that ordinarily take priority even over earlier mortgages. Most participating governments hire private companies to market the loans and make underwriting decisions.

For decades, official Federal Reserve Board staff commentary excluded tax liens and tax assessments from the act's definition of credit, and some courts relied on that commentary to hold the loans exempt. In 2018, Congress directed the bureau, in section 307 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, to apply two of the act's provisions to the loans: its ability-to-repay requirement and its civil-liability provision. Congress told the bureau to "account for the unique nature" of the programs.

The bureau's rule clarified that the tax exemption covers only involuntary liens and assessments. It also applied disclosure and waiting-period requirements drawn from the Real Estate Settlement Procedures Act and licensing rules for loan originators, and it required lenders to account for higher escrow payments. The bureau gathered data on about 370,000 applications in Florida and California from 2014 to 2019, and its report found the loans increased the probability of mortgage delinquency by 35 percent.

Building Resilient argued that section 307 limited the bureau to the two provisions Congress named, and that reading the act's definition of credit to cover the loans would make section 307 superfluous. Pryor answered that the ability-to-repay provision applies only to consumer credit transactions. "So the loans must involve consumer credit transactions for Congress's instruction to make sense," he wrote. Section 307 still limits the bureau's power to exempt the loans, the court said.

The group also argued that homeowners cannot be debtors because the loans are nonrecourse, meaning the owner bears no personal liability. The court noted that the act already covers reverse mortgages, which are also nonrecourse. "Building Resilient ignores where the true responsibility to repay falls: the homeowner," Pryor wrote. The rule was not an about-face, the court added, but "an application of an existing definition to a new form of credit."

The court also held that the rule was not arbitrary and capricious, a standard that requires agency action to be reasonable and reasonably explained. Building Resilient attacked the bureau's report as "fatally flawed," faulting its control group, its use of pre-reform data and its exclusion of the 22 percent of applications that could not be matched to credit records. The bureau said it had not relied on the report, and the panel held that, even if it had, the agency acknowledged each limitation and reasonably explained its choices. As for the group's claim that the measured harm was "negligible," the court said that question fell outside its review. "We ask only whether the agency came to a rational conclusion," Pryor wrote. "On the record before us, the answer is yes."

On the Tenth Amendment, which reserves to the states powers not delegated to the federal government, the group argued that the rule intrudes on state taxing power. "Building Resilient elevates a managerial technicality above the fundamental nature of the loans," Pryor wrote. Relying on 19th-century Supreme Court decisions distinguishing contractual debts from taxes, the panel held that the rule does not limit how governments collect repayment. "The Rule regulates the financing, not the resulting tax assessment," the court said, adding that it "regulates governments as market participants voluntarily lending credit."

The panel also rejected a claim of commandeering, the doctrine that bars the federal government from requiring states to enact laws or ordering state officers to enforce federal programs. Quoting the Supreme Court, it said the doctrine does not apply "when Congress evenhandedly regulates an activity in which both States and private actors engage." "The Rule regulates the programs evenhandedly, regardless of whether a local government or a private company operates the program," the court held.

The panel did not reach the group's argument that the bureau should have convened a small business review panel, holding that Building Resilient forfeited it by not raising it in its opening brief. It dismissed as moot the group's separate appeal from the district court's earlier denial of a preliminary injunction, because the final judgment superseded that ruling. The judgment for the bureau stands.