BRITAIN's high street banks fear a government crackdown after an official watchdog launched an unprecedented probe into their treatment of poor customers.

The Office of Fair Trading is investigating possible discrimination against homeless people in a move seen as part of an assault on social exclusion by the Blair government.

A letter sent to Midland, Barclays and other major banks by the OFT and obtained by The Independent, asks: "Does your company explicitly or implicitly refuse applications for current bank accounts for members of any specific groups, eg those of no fixed abode."

The letter, dated 28 January, requests information on how many current accounts have been refused, what percentage of business this amounts to and "What were the main reasons for refusal?"

The OFT gave a deadline of 18 February for the answers, but a stunned banking community admits many have not been able to comply with the short notice.

The OFT believes that 20 per cent of the population do not have bank accounts and has questioned whether the needs of vulnerable consumers are being met. Official concern is magnified by confirmation that there were 10,334 bank branches at the last count in1996 compared to 14,008 ten years earlier. Further closures have taken place in 1997.

Over the same ten years to1996, companies such as Midland, which closed over 500 branches, saw its profits grow from pounds 434million to pounds 1.2billion. Rival Barclays closed over 800 branches yet easily doubled its pre-tax profits to pounds 2.3bn in the same period.

The OFT is politically independent but the latest initiative by the OFT dovetails neatly with the activities of the cabinet's new social exclusion unit.

The British Banking Association was leading the fightback this weekend arguing the figure of 20 per cent of the population without bank accounts used by the OFT was not correct.

The assistant director Megan Salt, said: "I do not believe this figure. In fact we have statistics showing it's not correct." She pointed out that the question of whether or not homeless people were given bank accounts was not a simple one. Under money laundering legislation there was a need for banks to make stringent checks on who they were giving credit to.

A spokesman for Midland Bank said it was a commercial decision as to whether or not someone was given a bank account. But he added: "I do not recognise that the bank would not consider someone because they were in a particular sector of society."

Another leading high street bank said it was unfair for the OFT to target banks: "What about all the village stores that have closed? But I suppose we are an easy target because of our public image," said a spokeswoman, who asked not to be named.

The OFT said the letters were part of a wider initiative launched in December into the way financial services were provided to the more vulnerable sectors of society.

A spokesman denied it was politically driven, saying the letter had been sent to banks and building societies. "It is the job of the OFT to protect the consumer," he added.

Consumers' organisations recently attacked high street banks for failing to ensure that a Code of Practice, which sets out standards of practice for dealing with customers in financial hardship, was adhered to at branch level.

The voluntary code, published last year, states: "We will consider cases of financial difficulty sympathetically and positively. If you find yourself in financial difficulties, you should let us know as soon as possible. We will do all we can to help you to overcome your difficulties."

The National Consumer Council said the code was not detailed enough to cover the wide range of bank practices which can exacerbate hardship, such as pressing customers to consolidate all loans with the bank where the current account was held.

In another widespread practice, banks remove customers' cheque books and normal current account facilities in an effort to stop them slipping futher into debt. This made it expensive for customers to find a way to repay bills. "Indeed with local bank branches closing at the rate they are, people without current account facilities could find it very difficult to function financially from day to day," the NCC said. The Consumers Association yesterday welcomed the initiative. A spokesman said: "Whereas banks complaints are down on previous years they are still too high. Consumer satisfaction still isn't particularly high. We will be very keen to see that as many groups of consumers have access to banks and bank accounts as possible."