DRN-6322215

The complaint Miss S is unhappy that Lloyds Bank PLC charged interest on her credit card purchases after she took out a 0% money transfer, as she did not understand that maintaining a money transfer balance would prevent her from avoiding purchase interest in the way she had previously. What happened Miss S has held a Lloyds credit card since around 2020. For several years, she used the card for everyday purchases and avoided paying interest on her purchases by clearing her purchase spending in full each month. On 28 February 2025, Miss S contacted Lloyds to ask about taking out a money transfer. During the call, Miss S asked a number of questions about how a money transfer would work, indicating that she was unfamiliar with money transfers. Lloyds provided information about the transfer, including that it would attract a 0% promotional interest rate for a set period. During the call, Lloyds read some points of information to Miss S, one of which was that to avoid paying interest on purchases, Miss S would need to pay off her monthly statement balance in full and on time every month, including the value of any transfers. Miss S asked Lloyds to repeat this point, which they did, adding that this would apply unless a 0% promotional rate on purchases was in place. Miss S responded “yes”, and the money transfer went ahead. A £3,000 money transfer was completed on 28 February 2025 and appeared on Miss S’s March 2025 credit card statement. After taking the transfer, Miss S continued to use the credit card for purchases in the same way she had previously and made regular payments. These payments covered her purchase spending and included additional amounts intended to reduce the money transfer balance. From March 2025 onwards, however, Lloyds applied interest to Miss S’s purchase balance. This was because the money transfer balance remained outstanding, meaning the full statement balance was not repaid each month. Miss S became aware of the interest being charged in October 2025 and contacted Lloyds to raise a complaint. Miss S told Lloyds that she had not understood that taking the money transfer would mean she could no longer avoid purchase interest by paying off her spending each month. She said she had never previously paid interest on the account and believed the purchases and money transfer would be treated separately. Lloyds investigated the complaint and listened to the February 2025 call. They said they had provided accurate information about how interest would be applied and that interest had been charged correctly under the terms of the account. As a gesture of goodwill, they refunded £29.57 of interest from the October 2025 statement but did not agree to refund interest charged in other months.

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Miss S wasn’t satisfied with Lloyds’ response, so she referred her complaint to this service. One of our investigators looked at this complaint but didn’t feel that Lloyds had acted unfairly towards Miss S and didn’t uphold it. Miss S remained dissatisfied, so the matter was escalated to an ombudsman for a final decision. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. I issued a provisional decision on this complaint on 14 April 2026 as follows: When assessing this complaint I’ve considered all the available evidence including what Miss S and Lloyds have said, the terms of the credit card account, the account statements, and the recording of the call on 28 February 2025 before the money transfer was taken. I accept that Lloyds provided factually accurate information during that call. Specifically, Lloyds told Miss S that to avoid paying interest on purchases she would need to repay the full statement balance each month, including the value of any money transfer, unless a 0% promotion on purchases applied. I also accept that this point was repeated by Lloyds agent after Miss S asked for it to be repeated. However, my role is not limited to deciding whether Lloyds technically disclosed the correct information. I must decide whether, overall, they acted fairly and reasonably in the circumstances. And in this case, I do not feel that Lloyds did so. Miss S contacted Lloyds because she was concerned about interest. She had held the card for several years and had never paid purchase interest, as she routinely cleared her spending each month. This history was relevant, because the money transfer fundamentally changed how the card would operate in practice. The wording Lloyds used during the call, while accurate, did not explain the practical consequence that if Miss S maintained any outstanding money transfer balance, she would not be able to continue avoiding purchase interest by paying off her spending each month, as she had done previously. In my view, this was a non-intuitive outcome which was explained in very brief, non-explanatory language. Given the circumstances of the call, it was a foreseeable point of confusion that warranted clearer explanation. Although Miss S acknowledged the information on the call, there was no attempt by Lloyds to check her understanding or to explain how the rule would apply to her usual pattern of card use. Repeating the same wording did not, in my view, amount to ensuring that Miss S understood the real-world impact of the transfer. I also feel that had Lloyds taken the time to explain to Miss S, in real-world terms, what that clause meant for how she used the account, she would most likely have acted differently. What happened afterwards is consistent with Miss S’s explanation that she didn’t understand the full implications of maintaining a money transfer balance. She continued to use the card as she always had, paying off her purchase spending every month and making additional payments towards the money transfer balance. It was only months later that she became aware that purchase interest had been charged, at which time she contacted Lloyds about it. And I think it’s unlikely that Miss S would have used her account in this way had she been given a clear understanding by Lloyds. In taking this position, I’m not saying that Lloyds needed to give financial advice or recommend alternative products. But I do think that, given Miss S’s express concern about

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interest and her long-standing use of the account, Lloyds ought reasonably to have made it clear, in plain terms, how the money transfer would affect her ability to avoid purchase interest going forward. And this is especially the case given that Lloyds could see the history of Miss S’s account including that she made payments to avoid paying purchase interest. As such, while I accept that Lloyds applied interest in line with the contractual terms, I feel that fairness in these circumstances requires more than technical correctness. And I feel that Miss S’s financial detriment arose here because Lloyds did not do enough to ensure she understood the implications of the money transfer at the outset. For these reasons, my provisional decision is that I uphold this complaint in Miss S’s favour, with my provisional instructions to Lloyds being as follows: Firstly, Lloyds should rework Miss S’s credit card account to remove any purchase interest that has been charged because of the money transfer arrangement. This should include refunding all such interest and adjusting the account balance as if that interest had never been applied, so that Miss S does not remain disadvantaged by interest-on-interest or residual charges. Lloyds should also adjust their credit file reporting for Miss S’s account accordingly. Secondly, Lloyds should resolve the position of the remaining money transfer balance in a way that allows Miss S to once again manage her purchase spending without incurring interest, provided she continues to meet the same criteria she met before taking the money transfer. In practice, this should preferably be achieved by transferring any remaining money transfer balance to a separate credit card or internal account under the same 0% promotional terms that originally applied to the transfer. If this is genuinely not operationally possible, Lloyds should instead ensure that Miss S is not charged interest on future purchases so long as she pays off her purchase spending in full and on time each month, in line with how she used the account before the money transfer was taken. Finally, Lloyds should pay Miss S £150 in compensation for the distress and inconvenience caused by their failure to ensure she properly understood the consequences of the money transfer. In arriving at this compensation amount, I’ve considered the impact of what’s happened on Miss S alongside the general framework this service uses when assessing compensation amounts, details of which are available on this service’s website. And, having done so, I feel that £150 is a fair amount. *** Miss S responded to my provisional decision and confirmed that she was in acceptance of it. Lloyds also signalled their acceptance of my provisional decision in their response in which they raised no objections. Lloyds have also confirmed that Miss S cleared the transfer balance in November 2025, meaning that there is no existing balance to consider with regard to the provisional instructions I had issued. Accordingly, my final decision here is that I uphold this complaint in Miss S’s favour on the basis described in my provisional decision. While I accept that some of my provisional instructions may now be superfluous, given Lloyds report that no existing transfer balance remains, I repeat those instructions below for the sake of consistency. Putting things right Lloyds must rework Miss S’s credit card account to remove any purchase interest

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that has been charged because of the money transfer arrangement. This should include refunding all such interest and adjusting the account balance as if that interest had never been applied, so that Miss S does not remain disadvantaged by interest-on-interest or residual charges. Lloyds must also adjust their historical credit file reporting for Miss S’s account accordingly. If any existing transfer balance remains, Lloyds must resolve the position of the remaining money transfer balance in a way that allows Miss S to once again manage her purchase spending without incurring interest, provided she continues to meet the same criteria she met before taking the money transfer. Finally, Lloyds must pay Miss S £150 compensation. My final decision My final decision is that I uphold this complaint against Lloyds Bank PLC on the basis explained above. Under the rules of the Financial Ombudsman Service, I’m required to ask Miss S to accept or reject my decision before 26 May 2026. Paul Cooper Ombudsman

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