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Scammers across the U.S. are going door-to-door, pitching “free” solar energy systems. Many homeowners never get any solar equipment installed; those who do often get shoddy work. The criminals are leaving unsuspecting homeowners with massive debt; many victims have reported losing tens of thousands of dollars.

The con starts with a fast-talking salesperson offering a “limited time offer” for a free solar energy install. The big lie: The total cost of the project will be covered by tax credits and rebates, and you need to act now.

“This is just the latest version of home contractor fraud, but a much more lucrative one,” said Ira Rheingold, executive director of the National Association of Consumer Advocates (NACA). “We’re seeing people sold a bill of goods—financing that’s unfair, products that are defective, and installations that are poor.”

Randi, a homeowner in Florida, had two solar salespeople show up. They were “very aggressive,” she recalled, and kept pitching a government program that would let her have solar panels installed on her house for free.

“They were very pushy and didn’t want to take ‘no’ for an answer,” Randi told Checkbook. “They’re invading your space and trying to force you to do something you don’t want to do.” (For privacy reasons, Randi asked us not to use her last name.)

These hustlers usually trick consumers into signing long-term financial agreements with nonbank lenders that are part of the scheme.

Carliss Wileman, a Texas homeowner, told the AARP Fraud Watch Network that she wasn’t interested in going solar. But a smooth-talking salesperson promised her no more electric bills and a $30,000 tax rebate. Wileman told AARP that she had no idea the digital form she was convinced to sign was for an $85,000 loan. Today, Wileman has 50 solar panels on her roof, a leaking porch, and a mountain of debt.

Why Solar Scams Are So Dangerous  

Solar scams tend to be more sophisticated than other contract fraud because they involve costly and complex financing for the project. Victims often sign multi-page digital contracts on computer tablets without getting a chance to read the full terms.

“Most people have no clue as to what they're signing,” NACA’s Rheingold told Checkbook. “They're not seeing the full documents. They're not seeing what rights they're giving up, and they're not seeing the loan terms.”

Sometimes, the contract is sent to the wrong email address, Rheingold said, making it impossible for the homeowner to review it or cancel within the three-day window guaranteed by the Federal Trade Commission’s Cooling-Off Rule.

The Center for Responsible Lending (CRL) cautions that these contracts often contain forced arbitration clauses that prevent unhappy customers from suing in court. They also specify that consumers cannot rely on anything the salesperson told them.

“Given that solar systems and solar tax credits are complex subjects—and salespeople make oral representations about the contract and system details—this provision creates a situation ripe for abuse,” the report noted.

According to the CRL’s report, “The Shady Side of Solar System Financing,” these solar financing agreements often leave homeowners “in a worse economic situation than before the door-to-door salesperson visited them.” The debt incurred to buy the system “elevates the risk that the consumer will lose their home to bankruptcy or foreclosure,” the report cautioned.

Watch Out for These Four Tricks

Last year, the Consumer Financial Protection Bureau (CFPB) published a report highlighting the major gotchas with solar energy contracts. At that time, Diane Thompson, a senior advisor to the CFPB Director, told Checkbook the solar marketplace was “fertile ground for misrepresentations for unscrupulous contractors and others.”

The CFPB identified four major areas of concern, based on consumer complaints:

Exaggerated savings claims. Sales reps often claim that solar panels will eliminate electric bills and cover financing costs. “While this promise may be true for some homeowners, the financial benefits of solar projects are uncertain and can vary significantly by geographic location and season,” the CFPB cautioned.

Hidden markup fees. Solar contractors often receive referral fees from lenders that can inflate the total price of a project by 30 percent or more. These fees are typically rolled into the loan principal, which obscures the true cost of the system.

Misleading claims about total cost. Shady salespeople often tout a 30 percent federal “Investment Tax Credit,” but not everyone qualifies. And yet, many lenders present the loan amount as a “net cost” after deducting the expected credit, which misleads homeowners into believing they’re guaranteed to receive it.

Surprise balloon payments. Some contracts require a substantial lump-sum payment, due within the first year, that equals the expected tax credit. If the credit doesn’t come through, the homeowner is on the hook for that amount or faces much higher monthly payments.

Protect Yourself

It doesn’t matter what they’re selling—a new roof, driveway repaving, tree trimming, or solar panels—never hire someone who shows up at your door. You have no way of knowing who they are or if they represent a legitimate company.

And don’t give them any personal information. The Fraud Watch Network has received reports that some criminals use the door-to-door solar sales pitch as a ruse to get personal identifying information to commit identity theft.

“If you’re interested in going solar, research the costs and benefits on your own, and then get bids from several contractors in your area,” suggests Amy Nofziger, director of victim support for the AARP Fraud Watch Network. “Take your time and do your homework. Make sure solar is practical for your house. Don’t let anyone pressure you into signing a contract or making a payment up front.”

And beware of bogus claims. According to the U.S. Department of Energy, “the federal government does not offer any programs for free home solar panel installations.”

Here's the smart way to hire a solar contractor:

Talk to multiple companies. Checkbook suggests meetings with at least five contractors. See how they’d handle the project and what it would cost. The American Solar Energy Society has a list of questions to ask prospective installers. The bottom line: Does this seem like a company that you could work with?

Request detailed written bids. These should be binding quotes that include system specifications, the brand and number of panels to be installed, how long the project will take, and warranties on the equipment and installation work.

Vet potential candidates. The contractor should be licensed to perform electrical work. Visit the Better Business Bureau website to look for complaints. Is the company a member of any professional organizations, such as the North American Board of Certified Energy Practitioners? Get references and talk with them. Find out if the company did the work on time and on budget. Were they easy to work with, and would the person hire them again?

Understand your financing options. Figure out how you’ll pay for the project and whether you might qualify for any government tax credits or rebates from your electric utility. Cash is the cheapest way to go, but if you need financing, shop around for a solar loan, home equity loan, or Home Equity Line Of Credit (HELOC)—don’t rely on contractor-arranged financing.

Read the contract. Construction contracts can be complex documents that can be confusing. If you don’t understand what you’re being asked to sign, have a lawyer review it first.

More from Checkbook:

Thinking About Going Solar?

30 Ways to Save Energy at Home