Rhea Finance Limited · DRN-6228936

Complaint Miss C has complained about a loan Rhea Finance Limited (trading as Rhea Family Finance “Rhea”) provided to her. She says the loan was unaffordable and so shouldn’t have been provided to her. Background In October 2021, Miss C successfully applied for a loan from Rhea. It was to fund the litigation costs incurred for divorce proceedings. The loan was for £40,000.00 and had an APR of 16.2%. It didn’t have a repayment schedule and was to be repaid in full once the proceedings had concluded. Miss C settled the loan in full by repaying £52,869.15 in June 2024. One of our investigators reviewed what Miss C and Rhea had told us. She didn’t think that that Rhea had acted unfairly when deciding to provide this loan to Miss C and so didn’t uphold the complaint. Miss C disagreed with the investigator and asked for an ombudsman’s review of her complaint. My findings I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. Before I go on to set out my conclusions on this matter, I want to say that I can see that it’s clear just how strongly Miss C feels about her complaint and why she’s unhappy. So I think it might help for me to set out that while I may have not commented on each and every point that she’s made, I have read and considered everything she’s said. However, I’ve focused on the key things that have led to me reaching, what in my view is, a fair and reasonable decision. This is important as some of what Miss C is now unhappy about regards the legal advice she received. And for the purposes of this complaint, I’m only able to consider what Rhea is responsible for as her lender. For the sake of completeness, I’d add that the rules of this service permit me to do this as it reflects the nature of our service which was set up to be an informal alternative to the courts. Our typical approach to unaffordable and irresponsible lending complaints Rhea needed to make sure that it didn’t lend irresponsibly. In practice, what this means is Rhea needed to carry out proportionate checks to be able to understand whether Miss C could afford to repay before providing this loan. Our website sets out what we typically think about when deciding whether a lender’s checks were proportionate. Generally, we think it’s reasonable for a lender’s checks to be less thorough – in terms of how much information it gathers and what it does to verify it – in the early stages of a lending relationship.

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But we might think it needed to do more if, for example, a borrower’s income was low or the amount lent was high. And the longer the lending relationship goes on, the greater the risk of it becoming unsustainable and the borrower experiencing financial difficulty. So we’d expect a lender to be able to show that it didn’t continue to lend to a customer irresponsibly. Rhea’s checks before lending to Miss C Rhea says it agreed to Miss C’s application after obtaining some information about her and it carried out a credit search. However, I don’t think that this information played too much of a part in Rhea’s decision to lend to Miss C. I say this because I don’t think it unfair to say that Rhea actually relied on Miss C being able to repay this loan on her firstly having a successful outcome to her litigation and secondly her then using the proceeds she received from the matrimonial property being sold, in order to repay the balance. Miss C has said that it was unfair for Rhea to have lent to her on this basis. I’ve carefully considered whether this was the case. Was Rhea entitled to base its decision to lend to Miss C on her repaying her loan from the proceeds she would receive from the matrimonial home being sold? In the first instance, I’ve noted that Miss C has referred to final decisions on our published database. These decisions were about litigation loans, where the deciding ombudsman upheld the complaint as the lender lent solely on the value of the property subject to the litigation being funded. To be clear, I am familiar with the cases that Miss C has referred to. However, I think that it may be helpful for me to explain that the decisions Miss C has referred to involved loans provided under a different set of rules, regulations and guidance. The loans in the cases that Miss C has referred to were provided prior to 1 November 2018. This is important because on 1 November 2018 the regulator, the Financial Conduct Authority (“FCA”), introduced section 5.2A of its Consumer Credit Sourcebook (“CONC”). CONC 5.2A (which was and continues to be entitled ‘Creditworthiness assessment’. This new section of the sourcebook replaced CONC 5.2 and CONC 5.3 which had previously (from 1 April 2014 until 31 October 2018) contained the rules and guidance on ‘Creditworthiness assessment: before agreement’ and the ‘Conduct of business in relation to creditworthiness and affordability’. What this means is that for agreements entered into on or after 1 November 2018 – such as Miss C’s agreement here – is that it is CONC 5.2A, rather than CONC 5.2 and CONC 5.3 which applies. This is important because the outcomes on all of the cases Miss C has referred to relied on CONC 5.3.1G (2) and CONC 5.3.1G (6) (and also CONC 5.3.4R). CONC 5.3.1G was concerned with creditworthiness and sustainability. CONC 5.3.1G (2) stated: (2) The creditworthiness assessment and the assessment required by CONC 5.2.2R (1) should include the firm taking reasonable steps to assess the customer's ability to meet repayments under a regulated credit agreement in a sustainable manner without the customer incurring financial difficulties or experiencing significant adverse consequences.

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Sustainable was defined in CONC 5.3.1G (6) and it stated: (6) For the purposes of CONC “sustainable” means the repayments under the regulated credit agreement can be made by the customer: (a) without undue difficulties, in particular: (i) the customer should be able to make repayments on time, while meeting other reasonable commitments; and (ii) without having to borrow to meet the repayments; (b) over the life of the agreement, or for such an agreement which is an open-end agreement, within a reasonable period; and (c) out of income and savings without having to realise security or assets [my emphasis]; and “unsustainable” has the opposite meaning. I think that it would be fair to say that the guidance in CONC 5.3.1G (6)(c) does indicate that (prior to 1 November 2018) the regulator would consider it unsustainable for a borrower to have to realise security or assets in order to repay a loan. However, Rhea agreed to lend to Miss C in October 2021, which as I’ve explained, is after CONC 5.3 was removed from CONC. At the time Rhea accepted Miss C’s application CONC 5.2A was in force. The provisions most closely related to CONC 5.3.1G (6) are contained in CONC 5.2A.12R and CONC 5.2A.13R. CONC 5.2A.12 states: The firm must consider the customer’s ability to make repayments under the agreement: (1) as they fall due over the life of the agreement and, where the agreement is an open-end agreement, within a reasonable period; (2) out of, or using, one or more of the following: (a) the customer’s income; (b) income from savings or assets jointly held by the customer with another person, income received by the customer jointly with another person or income received by another person in so far as it is reasonable to expect such income to be available to the customer to make repayments under the agreement; and/or (c) savings or other assets where the customer has indicated clearly an intention to repay (wholly or partly) using them; … CONC 5.2A.13 states: If the customer intends to make repayments (wholly or partly) using savings or other assets, the firm must take into account: (1) the purpose for which the savings or assets are or will be held; (2) the likelihood of the savings or assets being available to make repayments under the agreement; and (3) any significant adverse impact on the customer’s financial situation of using those savings or assets. When comparing the previous CONC 5.3.1G (2) and CONC 5.3.1G (6) to the current CONC 5.2A.12 and CONC 5.2A.13, I think it is clear that the rules and guidance went from

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considering that it would always be unsustainable for a customer to repay a loan by realising savings, assets or security, to it being more acceptable for a customer to do so depending on the circumstances. It’s not for me to speculate on the reasons why the regulator amended the rules and guidance in this way. However, I cannot ignore the fact that the rules and guidance did change. And what is clear is that the mere fact that Rhea’s decision to lend appears to have been based on her realising savings or assets, in order to repay the loan, doesn’t in itself mean that Rhea breached its obligations or that Miss C’s complaint should be upheld. The other final decisions which Miss C has referred to, which for reasons I’ve explained rely on regulatory provisions contained in a different set of rules, do not persuade me that it was unfair for Rhea to have lent, solely on the basis that it did, in Miss C’s case. Nonetheless, while it wasn’t unfair for Rhea to have based its decision on to lend on Miss C realising savings or assets, I do think that it would only have been fair and reasonable for it to have done so, if there was a clear expectation that Miss C would use any funds achieved, in this way. And even if Miss C’s litigation was successful, the funds required to repay the loan would only have been realised with the matrimonial property being sold. I’ve therefore considered whether Rhea was reasonably entitled to conclude that the matrimonial property would be sold at the end of the litigation it was agreeing to fund. Was Rhea reasonably entitled to conclude that Miss C would have realise assets as a result of the matrimonial property being sold at the end of the litigation being funded? Miss C has said that the prospect of her losing the matrimonial property wasn’t well defined. It is unclear what she means by this but given she has also said she’s unhappy she’s had to move home, I can only assume that she’s saying she didn’t want to sell the matrimonial property. On the other hand, Rhea has said that it was always expected that the matrimonial home would be sold at the end of proceedings. I’ve thought about what Miss C has said. Having done so, I’m afraid that the available evidence doesn’t support it having been Miss C’s intention to retain and remain in the matrimonial property, after the completion of the litigation, when she applied for this loan in October 2021. I firstly say this because the information from Miss C’s application indicates that she was intending to relocate outside of the United Kingdom (“UK”) with her children at the end of the proceedings. The fact that Miss C’s loan application includes a case number for proceedings that Miss C had already instigated in order to relocate outside of the UK with her children, supports that this being her intention, at least at the time of her application. I think it unlikely that Miss C would have already instigated this process, if she had intended to remain in the matrimonial property, on completion of the litigation, at the time she applied for this loan. Indeed, I’m also mindful that there was a significant mortgage on the property and even then a successful litigation outcome would have seen Miss C receive a share of the property rather than the whole amount. Miss C’s solicitor forecasted an outcome where she’d receive 55%. I simply cannot see a situation where Miss C would have been able to purchase whatever share her ex-husband was awarded, take on and service the existing mortgage while also relocating outside of the UK. In these circumstances, I’m not persuaded that it was Miss C intention to remain in the matrimonial property once litigation had completed at the time of the litigation. Miss C’s intentions may have changed since the conclusion of her legal proceedings. But I don’t think that Rhea could have known this and I don’t think that it was unreasonable for it to have

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counted on the matrimonial property being sold and the proceeds being available to repay this loan when it became time to do so. I also think it unlikely that Miss C didn’t understand, or was unclear that she was being advanced this loan on this basis either. What if Miss C’s litigation had been unsuccessful? Miss C has also said that it was unreasonable for Rhea to accept her application for this loan as there was no guarantee she would have a successful outcome to her litigation (and so no guarantee that she’d have an asset to realise) and if she had been unsuccessful she had no other means of repaying Rhea. I can understand why Miss C would have been concerned about her ability to repay Rhea, had her litigation proved unsuccessful. However, the information provided shows that Rhea obtained a detailed explanation of the litigation proposed, its prospects of success and the likely amount Miss C would receive should she be successful. This explanation came from Miss C’s solicitor. I don’t think that it was unreasonable for Rhea to have relied on Miss C’s solicitor’s assessment of her prospects of success, in circumstances where the solicitor was a legal professional and it was well placed to assess to Miss C’s chances of obtaining a successful outcome. Furthermore, while I’ve not had confirmation of this, I also think it is unlikely that Rhea would have lent to Miss C unless her solicitor had outlined that there was a reasonable prospect of her obtaining a settlement at the end of her litigation. In any event, while Miss C has said that she had no means of repaying this loan should her litigation have proved unsuccessful, the fact remains that her litigation was successful. My role here is to consider whether things did go wrong and if they did do so, consider what should be done to put things right. I cannot and should not seek to correct matters that do not need correcting, because things did not actually go wrong. This is especially in circumstances where, for reasons I will come on to explain in the next section of this decision, I’m not persuaded that the customer did actually suffer a loss. So while I appreciate that Miss C might have gone on to have difficulty repaying this loan had her litigation ultimately proved unsuccessful, this did not happen and considering what might or might not have happened in these circumstances is not only speculative, it is unnecessary. As Miss C’s litigation was successful and she was able to repay this loan, I don’t think that it would be fair and reasonable for me to now uphold the complaint on the basis that Miss C wouldn’t have been able to repay the loan had her litigation not been successful. I’ll now proceed to explain why it is it is my view that Miss C has, in any event, not suffered a financial loss as a result of having been provided with this loan. Why I’m satisfied that Miss C hasn’t suffered a financial loss as a result of Rhea lending to her For the sake of completeness, I would also add that I’m not persuaded that Miss C has actually suffered a financial loss as a result of Rhea providing her with this loan. I appreciate that Miss C disagrees with this. She’s argued that she has suffered a financial loss as she had to repay this loan and not having the funds she had to pay has caused her difficulty. However, I don’t think that it automatically follows that Miss C would have had a further £52,869.15 (the amount she had to repay Rhea) available to her, had Rhea declined her application for this loan.

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Indeed, I’ve noted that our investigator, on more than one occasion, asked Miss C how she would have been able to proceed with her litigation had Rhea declined her application. And while Miss C has provided submissions on various matters during the course of this complaint, she hasn’t provided anything to show that she had a plausible and viable alternative (to this Rhea loan) that would have seen her be able to pay her legal costs. I say this because Miss C has said that she accepted this loan the day before family court proceedings and as far as I can see didn’t have access to other funds available to use on this litigation. Miss C has also said that two other lenders had turned down funding applications from her. As this is the case, it seems to me that Miss C had limited options when it came to paying for any legal costs she would inevitably have incurred had she continued with her litigation. Miss C has speculated over the possibility of obtaining a Legal Services Payment Order (“LSPO”). I don’t completely discount the possibility that Miss C could have obtained an LSPO. However, I’m not persuade that an application for an LSPO would more likely than not left her in a materially better position than this loan. In the first instance, any application for an LSPO is in itself likely to have required Miss C to obtain some form of legal representation. Indeed, if Miss C was going to embark on such a course of action as a litigant in person, I think she would have done this. I’m also mindful that as Miss C has said she was left requiring funding the day before family court proceedings, the time sensitive nature of matters also reduces the viability of an LSPO. Finally, even if Miss C had sought to obtain an LSPO, it is far from certain that she would have been granted one. Such orders aren’t granted as a matter of course. For example, in considering whether to grant an LSPO one of the factors typically taken into account by the court is whether the applicant is able to obtain credit to pay for legal services. In Miss C’s case, as Rhea accepted her loan application she was able to obtain credit. In any event, if she had been able to obtain an LSPO, I don’t think that it necessarily follows that Miss C would have obtained the settlement that she did obtain as a result of the representation that she paid for this loan. After all, it is possible that another litigator would not have been able to obtain the settlement that Miss C’s solicitor did and even then any LSPO granted may well have been taken into account when it came to determining a settlement. So, much like the investigator, while I accept Miss C may have ended up with less than she had hoped for at the time she applied for this finance, I’ve nonetheless not been persuaded that she would have received 50% of the sale proceeds of the matrimonial property without also incurring legal costs. In my view, it is entirely possible that Miss C could have ended up not receiving a settlement at all, had she not been provided with her Rhea litigation loan. As this is the case, I simply don’t agree that Miss C derived no real benefit from the credit in the way she argues and I’ve therefore not been persuaded that Miss C lost out as a result of Rhea lending to her. I’ve also noted that Miss C has said that it would be incorrect for me to place any weight on whether she benefitted from the loan. However, I’m afraid that I don’t agree with Miss C. I say this because I’m required to determine what’s fair and reasonable in all of the circumstances of Miss C’s complaint. This is wider than simply determining whether Rhea followed each and every one of its regulatory obligations.

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In my view, it would not only be unreasonable it would also be irrational not to consider whether Miss C actually lost out as a result of having been provided with this loan, when determining what is fair and reasonable in all the circumstances of her complaint. Interest rate on the loan Miss C has said that this loan had a high rate of interest. Having considered Miss C’s executed agreement, I can see that this loan had fixed interest rate of 14% a year. On page 4 of Miss C’s agreement, it is explained that should the full £40,000.00 be drawn down at the outset this would result in an APR of 16.2%. A hypothetical illustration (based on the full £40,000.00 being immediately drawn down) also shows how much interest would be accrued each year. As this illustration was based on a worst case scenario of the total £40,000.00 being immediately drawn down, I think that Miss C was provided with sufficient information to be able to have a reasonable understanding of the likely cost of this loan. I appreciate that Miss C has referred to the cost of this credit being high. However, while I accept that the interest rate on this loan wasn’t low, I don’t think it be considered to high. Indeed, the rate of interest on this loan wasn’t at a level where the lender would be regarded as being part of the regulator’s high-cost portfolio. Furthermore, as Miss C agreed to enter this loan in circumstances where the interest rate was set out on the agreement, I can only assume that she was prepared to accept the terms, at least at the time she entered into the agreement in October 2021. Rhea’s correspondence with Miss C around the time the matrimonial property was being sold Miss C is also unhappy at what she’s described as being constantly pressurised into repaying this loan. I’ve looked at the examples of the correspondence Miss C has provided. Having done so, I can see that these are all examples querying when the sale of the matrimonial property. Some of these are sent to Miss C’s solicitor and some are sent to Miss C directly. I don’t think that this correspondence was excessive or that it was sent to exert pressure on Miss C. Equally, as interest continued to accrue on the balance while the loan remained outstanding, I don’t think it was unreasonable for Rhea to take steps towards finding out when the loan was likely to be repaid. As this is the case, I don’t think that Rhea acted unfairly in sending Miss C and her solicitor the correspondence it did, once a settlement had been reached on the litigation. Other matters Finally, Miss C has raised a number of concerns regarding the actions of her solicitors. However, as our investigator has explained there is no dispute that Miss C did receive legal services, as a result of being provided with this loan. Albeit she is now disputing the adequacy of the services that she received. Miss C has said that I should be able to consider and then take account of the adequacy of the legal services she received. In doing so, she has once again referred to the two previous published final decisions I’ve mentioned earlier on in this decision. I’ve thought about what Miss C has said. While it’s fair to say that in one of the two cases Miss C has referred to the ombudsman upheld the complaint because of the legal services the customer received, the ombudsman’s conclusion was based on the fact that it was clear

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that the solicitor hadn’t provided most of the services it had billed Miss C for. In this case, I’ve not been provided with anything at all to support that Miss C didn’t receive what she was billed for. On the contrary, the fact that Miss C did receive a settlement supports the opposite being the case. Miss C’s arguments are all based on the fact that she now believes that were alternative legal options and strategies that could have been employed by her solicitor. In my view, it is the Legal Ombudsman that is best place to assess these matters and whether Miss C’s solicitor acted appropriately in this regard. So Miss C’s arguments regarding her solicitor’s competency, which these arguments effectively relate to, haven’t persuaded me to uphold her complaint either. In reaching my conclusions, I’ve also considered whether the lending relationship between Rhea and Miss C might have been unfair to Miss C under section 140A of the Consumer Credit Act 1974 (“CCA”). However, for the reasons I’ve explained, I don’t think Rhea irresponsibly lent to Miss C or otherwise treated her unfairly in relation to this matter. And I haven’t seen anything to suggest that section 140A CCA or anything else would, given the facts of this complaint, lead to a different outcome here. Conclusions I do appreciate that Miss C has been through a very difficult situation. I’ve been sorry to learn of the difficulties she’s been through. For the avoidance of doubt, I don’t seek to downplay the difficulties she’s told us about both before and after Rhea lent to her. However, my role here is to determine two things. Firstly, whether Rhea (as Miss C’s lender) did anything wrong in the course of its dealing with her. And secondly, if it did, whether Miss C lost out as a result. For the reasons I’ve explained, I’m not persuaded that Rhea did actually do anything wrong. It relied on Miss C being successful in her litigation and that she would then use some of the proceeds she would receive from her settlement, in order to settle this loan. The regulatory rules in place at the time of Miss C’s loan application permitted Rhea to consider Miss C realising savings or assets in order to repay this loan. It is possible that things could have gone wrong had Miss C’s litigation proved unsuccessful. However, this did not happen and Miss C did receive a settlement. I’m not persuaded that Miss C would have been able to achieve the settlement she did without the funds from this loan. I cannot envisage a situation where Miss C would have received her settlement without also incurring legal fees. As this is the position, Miss C is effectively asking me to place her in, I don’t think that it would be fair and reasonable for me to do so, or to uphold Miss C’s complaint. So overall and having considered everything, while I can understand Miss C’s sentiments and appreciate why she is unhappy, I’m nonetheless not upholding this complaint. I appreciate this will be very disappointing for Miss C as it’s clear that she feels strongly about matters. But I hope she’ll understand the reasons for my decision and that she’ll at least feel her concerns have been listened to. My final decision For the reasons I’ve explained, I’m not upholding Miss C’s complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Miss C to accept

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or reject my decision before 24 April 2026. Jeshen Narayanan Ombudsman

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