Fifth Third Bank faces a proposed class action alleging that its solar panel financing business violated the federal Truth in Lending Act (TILA) by failing to disclose that it keeps a significant portion of the cost of certain solar panel system purchases while telling consumers it was lending to them at a low interest rate.

In a complaint filed Friday in Richmond, Virginia, federal court, plaintiff Heather Kenny sued Fifth Third, as successor in interest to Dividend Solar Finance LLC, which Fifth Third acquired in 2022. Kenny claims that the lender secretly kept over $26,000 of the nearly $71,000 principal sum she took out to buy a solar panel system for her home.

Kenny alleges that Fifth Third violated a provision of TILA requiring creditors to disclose any finance charges consumers would face for buying on credit that they wouldn't face if making a cash purchase.

In June 2023, Kenny signed a financing agreement to buy a residential solar power system. According to Kenny, her financing agreement stated that she'd pay a finance charge of over $42,000 for her loan, a sum based on an annual percentage rate of about 4%.

However, Kenny claims that the description of the principal sum was a misrepresentation because her lender retained over $26,000 of that purported principal loan amount, which Kenny characterized in her suit as an undisclosed finance charge. This allegedly hidden fee caused the finance charge sum described in the contract to be understated and the annual percentage rate to be inaccurate.

Kenny claims that the undisclosed fee was included in her financing package because the lender was allegedly charging the relatively low interest rate of 4%. For context, economic data maintained by the Federal Reserve shows the prime loan rate in late May 2023 was 8.5%.

"By working with the seller/installer, [the lender] inflated the disclosed purchase price of the solar panel system because plaintiff borrowed money at a purportedly low interest rate," Kenny claimed in her suit, asserting that the lender didn't tell borrowers what their interest rate would be if the bank didn't retain a hidden fee.

Kenny cited an email she allegedly received from the solar panel system installer after she'd already inked her agreement with her lender indicating she would have paid just over $44,000 if buying the same solar panel system in cash.

Kenny also alleged that Fifth Third has a practice of sharing a rate sheet with solar panel system companies, but not borrowers, breaking down the hidden fees associated with various credit terms it offered. The bank also does not inform potential borrowers what the interest rate would be if Fifth Third Bank didn't retain a hidden fee in the transaction, the complaint alleged.

"Fifth Third Bank was incentivized to act as it did because the hidden fee would have required plaintiff to pay not only $26,000 more in principal than she should have — but also the interest that would have accrued on that amount over the course of the 25-year loan," Kenny claimed.

"Because Fifth Third Bank charged a fee to plaintiff simply because she financed her purchase on certain credit terms, Fifth Third Bank had a legal obligation to disclose that amount to plaintiff as a finance charge," the consumer said.

Representatives for the parties did not immediately respond to requests for comment Monday.

Kenny is represented by Kristi C. Kelly, Andrew J. Guzzo, Casey S. Nash, J. Patrick McNichol, and Matthew G. Rosendahl of Kelly Guzzo PLC and Thomas Domonoske of Consumer Litigation Associates.

Counsel information for Fifth Third wasn't immediately available Monday.

The case is Kenny v. Fifth Third Bank National Association, case number 3:24-cv-00402, in the U.S. District Court for the District of Virginia.