Are the banks ready to close free accounts?

Industry analysts believe the OFT is likely to allow banks to introduce monthly fees for current accounts, despite vehement and widespread opposition from the public.

Customers could also be charged for writing cheques, making bill payments by direct debit or standing order, and making cash machine withdrawals.

Doug Taylor, personal finance campaigner at consumer group Which?, said: 'This study is only necessary because the banking sector seems incapable of creating a fair deal for its customers.

'Banks generate income from current accounts by paying low interest rates to their customers already.' Banking bosses are seeking to introduce the fees as a way to claw back the profits they currently make from penalty charges for those who go overdrawn.

Those charges, which make the banks more than £2billion a year, have been labelled exorbitant, unfair and possibly illegal by the OFT.

But the banks have made clear that they would retaliate against any crackdown on penalty fees by introducing current account fees for everyone.

Any such change would be extremely controversial and consumer groups such as Which? believe it would be totally wrong to allow the banks to substitute new current account fees for the existing rip-off penalty charges. They pointed out that the banks have recently reported record multi-billion pound profits and have plenty of other ways to generate income.

These include investing the cash held in current accounts and selling customers expensive loans, credit cards, mortgages and insurance.

But John Fingleton, OFT chief executive, has already suggested that upfront fees might be a fairer way to charge for banking.

He said: 'We can't expect the banks to provide a personal current account service at a loss to all consumers.

'If as a result of substantial changes in current account default charges the service would be loss-making. . .the banks would have to recoup the money elsewhere.' Where fees are introduced, he said they must be clear.

Research by uSwitch found 83 per cent of people oppose automatic current account fees.

Yet a spokesman for the price comparison website warned: 'The end of "free banking" as we know it is nigh.' There is evidence that free banking is already on the way out. The First Direct telephone and Internet bank began charging up to 200,000 customers £10 a month for their accounts from the beginning of February.