Lloyds forced to pay back interest

ALAN GOLD, a London dentist, is to receive a refund of more than pounds 1,000 from Lloyds Bank after the Banking Ombudsman decided it had overcharged him for an overdraft.

Other Lloyds customers who complain are also likely to receive compensation. The bank says it will consider similar complaints on a case-by-case basis.

Mr Gold's struggle with Lloyds goes back to the summer of 1991, when he noticed that the interest charges on his Lloyds overdraft linked to his American Express Gold Card seemed high. He had held the card for about 10 years and interest on the overdraft was originally to be 2.5 percentage points over the bank base rate.

In 1991, he checked with Lloyds and discovered that he was paying 19.5 per cent interest, eight points over the base rate at that time. Lloyds said it had changed the terms of the Gold Card overdraft so that interest would be charged on a 'managed' basis. There would be no automatic link to the base rate.

Mr Gold was furious because he could not remember any warning from the bank about the change although it claimed to have written to customers at the end of 1987. It also produced a copy of a letter it sent to customers at that time.

Mr Gold complained to the Banking Ombudsman, Laurence Shurman, who decided that he had not been properly informed. Mr Shurman ordered the bank to refund Mr Gold with difference between the original rate he had been quoted and the higher rate the bank had charged, backdated to the end of 1987.

Mr Shurman noted in his judgment that although Lloyds had produced a letter that it claimed to have sent to card-holders, it did not have a copy of the tape from which it was generated 'let alone copies of individual letters as sent or any other detailed verification of dispatch'.

On Friday, Mr Gold received confirmation that Lloyds would repay him pounds 1,059. Four other Gold Card customers are known to have complained to the Ombudsman. One, Peter Marshall from Cumbria, has also received a judgment in his favour.

Mr Gold is convinced that the bank failed to inform any of its American Express Gold Card customers about the change in interest rates.

'I feel strongly that Lloyds should refund everyone who could have been affected,' he said. Lloyds is refusing to do this. A spokesman said: 'We genuinely believe we informed customers and the Ombudsman's ruling on Mr Gold was specific to him. It was not a general ruling.'

However, the bank said that it would consider any further complaints on an individual basis.