The Office of Fair Trading is to launch an investigation into whether banks should be forced to charge customers for having current accounts.

The study will sit alongside its inquiry, announced last month, into the fairness of penalty charges for unauthorised overdrafts.

The OFT believes that banks may be subsidising "free" current accounts with hidden fees, such as heavy charges for unauthorised overdrafts when customers go into the red, often without realising.

The regulator said it would examine "whether ... so-called 'free if in credit' current accounts deliver sufficiently high levels of transparency and value for consumers".

It will examine whether competition would be improved "if there were a shift away from the widespread provision" of these free current accounts.

It aims to publish the findings of its study by the end of the year but did not rule out a referral to the Competition Commission, should it need to impose tough sanctions on the banks.

John Fingleton, chief executive of the OFT, has previously raised the possibility that banks should be forced to make up-front charges for current accounts in return for the removal of hidden charges.

The OFT's investigation comes after the Competition Commission investigated the banking market in Northern Ireland. It concluded that banks there have "unduly complex charging structures and practices". The OFT believes the same issues are likely to be relevant in Britain.

Last April the OFT ruled that some very high penalty charges for overdrafts and credit cards were unlawful.

The OFT's initial inquiry into the fairness of overdraft fees came in the wake of widespread public outcry at excessive fees imposed when people did not realise they had overdrawn.

The Citizens Advice Bureau, welcoming the inquiry, today highlighted a case where a man in Surrey went 20p overdrawn because of a direct debit payment, was charged a total of £300 by his bank and threatened by debt collectors with court action if he did not pay.

It also highlighted a single mother with three children and on benefits in Somerset who was charged £90 for an unauthorised overdraft, which swallowed up most of her child and council tax benefit.

Barrister Tom Brennan is hoping to bring a test case against NatWest. He is seeking damages from the bank after running up penalty charges of £38 for each lapse. He claims the charges were unlawful because, by his estimate, it costs the bank £2.50 to cover the cost of a customer breaching its overdraft limit.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax