Family Law Loan Controversy

| General



On 16th June 2022 The Law Society published a report on loans that have been processed by family lawyers to fund client divorce cases.

These Loans Are Commonplace, Nothing To See Here…Right?

Whilst most cases proceed to a satisfactory conclusion some cases do not. The main item considered in the Law Society Gazette’s Report was loans to fund divorce proceedings, with a high-interest rate and where the respective legal adviser had seemingly exerted undue pressure on the client aiming for a loan to be taken out. The Law Society Report did not make for happy reading.

What Went Wrong In The Highlighted Cases?

All appeared to be rosy in the garden. Clients were seemingly approaching lawyers for advice and guided by their appointed legal professionals have taken out large loans. However, numerous family law clients had been encouraged to accrue eye-watering debt levels with many having very little prospects of successfully paying back the money and consequently being forced to part company with their assets. 

How Many Clients Have Been Impacted By These Claims?

The Report highlighted that over twelve persons had submitted claims for a loan to fund their divorces after relying upon the advice of the lawyer. In the previous decade those faced with borrowing monies perceived they had little option but to apply for loans ranging from a mere £20,000 to just short of £400,000 at an interest rate of up to 30%. 

This was not the first time the loan company found itself in trouble. In July 2021 it had exerted undue pressure on a party in view to forcing them to take out around a £50,000 loan to fund litigation proceedings at nearly twenty percent interest. Due to this the Financial Ombudsman Service forced the lender to terminate the loan agreementand restricted the client’s liability to nearly £2,000. 

What Actions Should Lawyers Be Taking In Response?

Lawyers specializing in the legal realm of family law should be following a strategy of:

  • avoiding exaggerating property values
  • not aiming for a significantly larger loan to be leveraged against the property
  • protecting their positions by ensuring that advice is communicated to clients clearly and in writing. This is especially imperative in matters involving the loaning of monies against the property value and 
  • not communicating mixed-messages to clients. 

Lawyers should be making concerted efforts to identify instances where clients are being advised on fund shortages and where such clients are simultaneously being encouraged to borrow. Clear communication channels are key particularly about the need to seek independent advice on the provision of loans. This should not be perceived as trivial issue. Clients should be strongly encouraged to attempt Alternative Dispute Resolution and the benefits such as saving court time and costs. The effort will potentially be viewed favourably at a later stage. They should avoid advising clients that the respective opposition spouse is having difficulty conducting themselves and the lent money proposed was intended to level the legal playing-field. 

If lawyers can keep to what was initially agreed at the first client meeting will go a long way to ensuring monies remain in client account if the resources were initially intended to be a contingency fund.

Communicating with clients and assessing their financial situation. Lawyers should be confidentially advising clients:

Lawyers can reduce the risk of clients alleging unfair treatment whilst going through the divorce process by following this strategy. 


#BrabnersLLP #HalBrownFamilyLaw #IrwinMitchell #JMWSolicitors #MaguireFamilyLaw #Mills&ReeveLLP #MSBSolicitors #Weightmans #Aaron&Partners #FarleysSolicitorsLLP #HillDickinsonLLP #McAllisterFamilyLaw #MyersonsSolicitorsLLP


[SOURCE 1] Hyde, John – Exclusive: Solicitors probed over client loans to fund divorce cases - 10 June 2022 – Law Society Gazette - Exclusive: Solicitors probed over client loans to fund divorce cases | News | Law Gazette

[SOURCE 2] Bryan, Kenza – Revealed: high-pressure loans that cost families their homes – The Times – 01 February 2020 - Revealed: high-pressure loans that cost families their homes | Money | The Sunday Times (

[SOURCE 3] Fouzder, Mondipa – Lawyers should be last resort for separating families – McFarlane – Law Society Gazette – 12 November 2020 - Lawyers should be last resort for separating families - McFarlane | News | Law Gazette



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