The use of a relational time in quantum mechanics is a framework in which one promotes to quantum operators all variables in a system, and later chooses one of the variables to operate like a 'clock'. Conditional probabilities are computed for variables of the system to take certain values when the 'clock' specifies a certain time. This framework is attractive in contexts where the assumption of usual quantum mechanics of the existence of an external, perfectly classical clock, appears unnatural, as in quantum cosmology. Until recently, there were problems with such constructions in ordinary quantum mechanics with additional difficulties in the context of constrained theories like general relativity. A scheme we recently introduced to consistently discretize general relativity removed such obstacles. Since the clock is now an object subject to quantum fluctuations, the resulting evolution in time is not exactly unitary and pure states decohere into mixed states. Here we work out in detail the type of decoherence generated, and we find it to be of Lindblad type. This is attractive since it implies that one can have loss of coherence without violating the conservation of energy. We apply the framework to a simple cosmological model to illustrate how a quantitative estimate of the effect could be computed. For most quantum systems it appears to be too small to be observed, although certain macroscopic quantum systems could in the future provide a testing ground for experimental observation.