Lloyds' Gold iceberg puts it in deep waters: Ombudsman rules that lifting the card overdraft rate was misleading for bank's customers. Maria Scott reports

LLOYDS BANK has been ordered to refund money to a man whose gold card overdraft rate was raised without clear warning.

Alan Gold, a Knightsbridge dentist, believes Lloyds owes him about pounds 1,000. His case could be the tip of an iceberg for Lloyds since the Banking Ombudsman, Laurence Shurman, has had other complaints about the same issue.

Mr Gold had an overdraft with Lloyds Bank, linked to an American Express card, for 10 years. The attraction of the overdraft was that it was at 2.5 per cent over the bank base rate. But in mid-1991 Mr Gold noticed that the interest charges on the loan seemed to be high.

He checked with Lloyds and was astounded to discover that he was now paying an annual rate of 19.5 per cent, eight points over the base rate at the time.

Mr Gold was told that the overdraft rate was no longer 2.5 points over base rate. It had been switched to a 'managed' basis.

This means the rate is set at an amount that the bank thinks appropriate and bears no direct relationship to the base rate.

Lloyds made the change at the end of 1987 and at that time the managed rate was 12.6 per cent, so by the time Mr Gold noticed the new rate it had increased by nearly 55 per cent.

Mr Gold was furious since he could not remember any warning from Lloyds about the change. The bank claimed to have sent a letter to its gold card customers in 1987 informing them of the change. Mr Gold said that even if he had seen the letter he would not have appreciated that a managed rate could differ so markedly from a base-rate-linked loan.

His case was highlighted in the Independent in July 1991 and Mr Gold later complained to the Banking Ombudsman.

Yesterday he received confirmation that the Ombudsman was to order Lloyds to refund the difference between interest at 2.5 per cent over base rate and the managed rate. He believed this would have to date back to the end of 1987.

A spokesman for Lloyds said it accepted the Ombudsman's judgement and would be paying a full refund.

The bank was unable to give details of the amount and nor would it comment on similar complaints.

Mr Shurman wrote to Mr Gold last July informing him that he was minded to decide in his favour although Lloyds was given time to submit further evidence.

Lloyds defended itself vigorously in the dispute, consistently denying any attempt to mislead gold card overdraft customers and insisting that the bank informed them of the change.

Mr Gold was not the only customer to have been taken unawares. After details of his case were outlined in the Independent other readers made similar complaints.

One, Peter Marshall of Cumbria, said he became suspicious about his interest rate in 1991. 'I wrote to query this in October 1991 to find that the rules had changed.

'I felt the manner in which Lloyds altered the rules for the gold card account was dubious and misleading.'

Mr Marshall said that when he queried the change with Lloyds he was told that the new terms were included in an application he had signed in October 1988 for a separate card. He said the new rate had been mentioned in this, but in the small print.

Yesterday he was still waiting for a decision from the Ombudsman.

Mr Gold said: 'I am pleased with the outcome although it has taken a long time.'

(Photograph omitted)