The loan training video also appears to conflict with the solar company’s ethics policies.
BY THE CAPITOL FORUM NOVEMBER 28, 2019
Garage with rooftop solar panels to generate electricity for a nearby house, Billings, Montana, May 2019.
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“So, every time we install a loan account, in the immediate, it’s a lot more valuable than a [Power Purchase Agreement] or a lease … the company realized a little while back that it would round us out and hopefully our stock price would go up and investors would love us and the Street would love us if we started doing a bunch of loan,” Vivint Solar sales representative Jed Wintle tells a roomful of door-to-door salespeople in a training video on selling prospective customers a solar loan.
The presentation’s moderator introduces Wintle as having installed more loans in a year than “most people have … in their lifetime,” stating that, “anything [Wintle] says during this meeting, especially pertaining to loan, is exactly what you guys need to repeat. Because it’s going to be gold.”
In the video, Wintle teaches a roomful of door-to-door salespeople the “four pillars” of selling prospective customers a solar loan; that when done right, the customers “will literally just sign anything,” he claims.
Throughout the video, Wintle emphasizes the “bags of cash” associated with solar tax credits, making the pitch “stupid simple,” and that it’s a “no cost program” with “a flat rate that’s fixed forever and it’ll never go up again” – methods that a separate Vivint Solar ethics video warns can be deceptive and misleading.
This is the second internal sales training video that appears to promote conduct contrary to the ethics video and recommends sales practices that state regulators and private litigants allege are deceptive, as reported by The Capitol Forum here and here.
While the company’s present and future conduct is being monitored pursuant to the terms of the New Jersey Attorney General’s August 2019 Consent Order, other regulatory scrutiny can be backwards looking. Pending state investigations and lawsuits in New Mexico and Hawaii deal with prior conduct. The New Mexico AG’s lawsuit, for example, covers conduct between August 2015 and March 2018.
Vivint Solar did not respond to requests for comment other than asking where The Capitol Forum obtained the video. The video was recorded in the New England region of the United States and appears to be filmed in late 2016 or early 2017 based on Vivint Solar’s timeline of its loan offering and conversations with former Vivint Solar employees who spoke to The Capitol Forum under conditions of anonymity. The video was maintained on Vivint Solar’s official Vimeo account. A full transcription is available here.
In its November 6, 2019 3Q earnings report, the company wrote, “our sales professionals … may, without our knowledge and despite our efforts to effectively train them and enforce compliance, engage in conduct that is or may be prohibited under our standard practices … and applicable laws … Any such non-compliance, or the perception of non-compliance, potentially could expose us to … litigation, investigations, or enforcement actions by private parties or regulatory authorities, as well as substantial fines and negative publicity, each of which may materially and adversely affect our business and reputation.”
“Company needs loan, wants loan. It makes us look good to Wall Street.” Vivint Solar first announced the addition of its loan product in 2015. Since then, it has grown to be an important cash generating vehicle to support its higher margin offering – the Power Purchase Agreement (PPA).
The cash generated from the company’s operations, like system sales—when customers purchase solar energy systems through loans or cash— “finance a portion of the company’s variable and fixed costs associated with installing solar energy systems,” according to the company’s most recent quarterly filing.
Between 2015 and 2017 Vivint Solar saw rapid growth in its system sales revenue from $762,000 in 2015 to $114,462,000 in 2017, according to the company’s SEC filings. The growth slowed somewhat between 2017 and 2018 when system sales accounted for $113,129,000 in revenue.
In the video, Wintle summarizes the company’s emphasis on its loan offering: “Who knows why the loan’s important to the company first of all? Cashflow. Straight cash only. So, the PPA, the lease accounts, they provide ongoing revenue for the company. And that’s one way that Wall Street … values our company. The other way they do is cash now. Right?”
The company reflects Wintle’s emphasis on cash in its 2018 annual report, writing, “We believe System Sales are advantageous to us as they provide immediate access to cash.”
In the training video, Wintle asks the audience rhetorically, between a representative selling loans versus Power Purchase Agreements, “Who do you think was a bigger deal in [a] meeting conversation with the leadership guys? Loan, loan,” he answers.
Training designed to avoid too many questions from prospective customers. At a higher level, the pitch is designed in a way to get the consumers to avoid focusing on the fine print. In the video Wintle explains that he is on a tour to “standardize how the loan is pitched,” training different teams on the “four pillars” method developed by a management team in Utah: No Cost; Flat Rate; Tax Credits; and Equity/Ownership.
“[T]his little formula right here,” Wintle says, simplifies the pitch. Specifically, Wintle says that a Utah office that “pitched it this way, talked about the loan this way, kept it really simple, which is going to be the theme here, and [they] started to kill the loan.”
To avoid confusing customers, he advises the trainees to cut out “all these little details and crap.” “Customers don’t need to know everything you think they need to know,” he says.
In the video, Wintle emphasizes that, “Once you [start] getting better [at the four pillars approach] and [the customers] got what the program is conceptually, then they would go with like any fine print. They wouldn’t even look at the fine print, right? So, the first 50 [loan accounts] I closed, two-hour … closes … The next 50 I had people, and still do, don’t even ask what the total loan amount is. Don’t even ask. And it sounds stupid. I don’t know if people in Utah are just stupid. Interest rate – don’t ask. Warranty specifics – don’t ask. ‘What happens if my roof leaks?’ Stopped getting all those questions. Because if they understand [the four pillars], I know that sounds weird, but trust me that’s what happened.”
Wintle goes so far as to encourage the sales reps to walk away from customers who ask specific questions, “If you have a customer that is asking really specific, yeah, but how much more will my house be worth in 10 years? That’s either not your customer, right? Electrical engineer dude or whatever you should walk away from.”
Later in the presentation Wintle emphasizes that the customers are “not reading the documents. They’re not reading anything.” He continues, “I could slide in anything I want. I could. I could slide anything I want. You just bought a freaking used car and it’s not warranted anymore. I just I just slid it in. You signed it. You bought it. Because they’re sold so well theoretically … that they will literally just sign anything. And when you’re doing docs, then you’re talking about is your son in the military? Sign this one. Have you guys, oh man, that’s sweet. What year is your truck? Sign this one. And you guys are done. That’s how they get closed if you’ve done it correctly up to that point.”
Internal ethics and sales videos conflict. The Vivint Solar ethics video features Brandon Holmes, Director of Sales at Vivint Solar. He explains “The best way to prevent [legal or ethical discrepancies] is simply knowing what to say and what not to say and knowing the issues to avoid.”
Holmes lists ways “to prevent any legal or ethical discrepancies surrounding Vivint Solar’s offerings” by clearly stating that a credit check is required, that loan payments aren’t locked in, and that tax credits are “not a check or a bag of cash that they will receive in the mail.” A full transcript of the ethics video is available here.
In contrast to Holmes’ guidance, Wintle says sales representatives can tell some customers, “I don’t need to run your credit,” highlighting that loan rates are “locked-in,” “fixed” and “flat” on 16 occasions, and describing the tax benefits as “free money” and “bags of cash” nine times throughout the video.
New Mexico Attorney General lawsuit cites certain practices The Capitol Forum observed in sales video. The New Mexico Attorney General filed a wide-ranging complaint against Vivint Solar on March 8, 2018 alleging 17 counts of wrongdoing from racketeering to false advertising.
The New Mexico AG alleges in its sixth count, Vivint Solar’s “business activities reveal a pattern and practice of unfair, deceptive, and unconscionable trade practices in offering and providing solar power to consumers.”
One such practice, the New Mexico AG lists is “Vivint controls the action of signing the contract by making consumers sign on an electronic tablet while the sales manager ‘reviews the terms.’”
The New Mexico AG also references the soliciting products based on promises of flat rates, “upgrades” to the home, or “no cost” programs, as “willful violation of [the Unfair Practices Act],” according to the complaint.
Beyond promising flat rates in the video, Wintle equates the solar system to a Corvette – telling the trainees “what you’re trying to upgrade them to is legitimately better.”
He also refers to the loan offering as a “no cost” program on twenty instances throughout his presentation, emphasizing his language near the end: “So in my pitch, habitually, we’ll say there’s no cost out of pocket. This is the no cost version of the program. Say there’s no cost for you like five times. And I’ll watch their eyes. On like the fourth time, they’ll go the light bulb comes on and they’re like, oh, there’s no cost.”
NJ consent order prohibits company from engaging in tactics that appear in sales video. While Vivint Solar denied the allegations in the New Jersey Consent Order, the company agreed to alter its business practices in New Jersey, as initially reported by The Capitol Forum.
For example, Vivint Solar agreed that “During Solicitations, Sales Representatives shall not represent … that a Consumer’s monthly electric bill will be lower after installation of a Solar Energy System,” according to the consent order.
The New Jersey AG settlement continues, “During Solicitations, Sales Representatives shall provide Consumers with an adequate opportunity to read the Vivint Solar Contract prior to signing.”
In the “four pillars” sales video Wintle says to the room, “When I would go back to [the customer to] present, it was this simple AC. And then they saw [the four pillars] in the middle. And then on my iPad was a picture of their [solar design]. That’s all they could see.”
NJ order mandates “remedial and/or disciplinary steps” if order violated. The New Jersey order imposes significant monitoring and compliance mandates in addition to a list of “prohibited and required business practices”—requiring the company to change how it solicits, advertises, and installs solar panels, how it trains its sales force, and how it writes its contracts.
In the section on training, the order requires Vivint Solar to “implement revised training materials,” retrain its representatives, and if any sales representative “engages in deceptive or improper conduct,” Vivint Solar must disclose the action it took to discipline that representative to the state.
In the training video Wintle concludes, “take whatever out of [the four pillars] that you like, but we got to the point where we could [create an account] in 30 minutes and then [present a design and close] in 30 or 40 minutes and be done. Cancels went way down. Opportunities to present went way up. And the life just got so much easier if you put in some of these little best practices.”