Across Texas, door-to-door salesmen talked up solar energy as a no-brainer: a way to boost a home’s value, snag a federal tax break and escape ever-rising utility bills. But since a rooftop solar system typically costs $25,000 or more, financing was key, and the sales reps had an answer for that. They pitched a new kind of instant, no-hassle loan with low interest rates and zero money down.

The loans came from “fintech” (short for financial technology) lenders, and thanks to artificial intelligence, they could be approved in mere seconds. Customers could complete the entire transaction on a smartphone or tablet “at the kitchen table,” to quote one lender’s marketing materials.

But when they entered their digital signatures on loan agreements, there was no way for consumers to know they were paying a large, hidden markup, a San Antonio Express-News investigation found. It happened to thousands of Texas homeowners.

Their charges range from 10% to 30% of the cost of a rooftop system and sometimes exceeded 50%, according to plaintiffs’ lawsuits, loan documents, industry experts and government reports.

The lenders’ failure to disclose the fee, along with overly broad statements about the federal solar tax credit, camouflaged the true cost of the loans and caused many consumers to spend thousands of dollars more for their rooftop systems than if they had paid cash or gotten financing from banks or credit unions, the paper found.

The markup is best-known as the dealer fee but is sometimes called the program or platform fee or the original issue discount. By whatever name, it increases the dollar amount of a loan above and beyond the cost of materials and labor, and it means the homeowner must pay interest on a larger principal for as long as 30 years.

A San Antonio couple, Cathy and Frederick “Bill” Evans, say that after signing contracts for a rooftop solar system, they learned the loan included an undisclosed dealer fee of nearly $13,000 — almost 30% of the project’s cost. “They need to do something about what we’re going through,” said Cathy, 70, referring to elected officials and regulators. “We fought, and we got nothing except money going out of our pockets.”

In a lawsuit against four fintech lenders that operate nationwide, Minnesota Attorney General Keith Ellison said that in his state alone, the companies collected $35 million in “hidden fees” over six years ending in 2023, driving up the cost of more than 5,000 rooftop solar systems. Minnesota has a total of 18,500 rooftop systems. Texas has more than 276,000.

The dealer fee came “at the expense of consumers who may never have taken out a loan … if they had been informed of the true cost of such financing,” Ellison said in court filings. The attorneys general of Kentucky and Tennessee are pursuing similar suits.

A separate suit filed on behalf of homeowners in California contends that Solar Mosaic, the fintech lender that financed the Evanses’ rooftop system, charged dealer fees of up to 34.75%. 

Solar lenders do not dispute that their sales pitches, marketing materials and loan agreements do not spell out the dealer fee. Rather, they contend the fee is not a finance charge that must be disclosed under the federal Truth in Lending Act.

They say it’s an “optional” fee that solar installation contractors pay Solar Mosaic and other fintech lenders in exchange for low-interest financing for their customers. The contractors decide whether to swallow some or all of the cost or recoup it from homeowners, according to the lenders.

“Any fees an installer pays (Solar) Mosaic are not finance charges under longstanding federal law,” the company said in a statement.

Ellison and plaintiffs’ lawyers say that argument is “a fiction.” They assert in court filings that the dealer fee is not optional but is built into all fintech loans, that are ultimately paid by customers, not contractors, and that the failure to divulge it is a violation of the Truth in Lending Act and state laws.

The Express-News examined standardized loan agreements and installation contracts signed by 10 Texas homeowners who purchased rooftop solar systems. None of the documents detailed the dealer fee or acknowledged it was built into the project cost and the loan amount. The loans were issued by several of the nation’s largest fintech solar lenders, including Solar Mosaic and another California-based company, Good Leap.

Whether or not it’s required by law, there’s nothing to stop lenders from revealing the dealer fee.

It’s a disservice to customers to do otherwise, said Bret Biggart, CEO of Freedom Solar, an Austin-based solar installation firm. As an alternative to fintech financing, his company works with a credit union to offer loans to its customers, and all fees and charges are disclosed, he said.

“The idea is that the customer should know what the situation is,” Biggart said. “If the customer is willing to pay a dealer fee, that’s great. Let’s just be transparent about what that amount is. There is no version of the truth; there is just the truth. Transparency is the way.”