Government plans to encourage banks and building societies to introduce a basic current account accessible to all have received a serious blow.

Without the full co-operation of the banking sector the governments big idea is impractical

Stuart Cliffe, National Association of Bank and Insurance Customers

The Banking Code Standards Board (BCSB), which oversees adherence to the industries code, has found major shortfalls in service levels offered by organisations which provide the accounts.

BCSB researchers, posing as shoppers, surveyed 15 banks and building societies.

The survey found that vulnerable low income customers were offered unsuitable products, such as credit cards, when trying to open accounts.

Basic bank accounts which allow customers to deposit cheques and access their money are not supposed to come with credit facilities.

Identification

At the other end of the scale, some customers were refused accounts because they did not have a passport or driving licence.

We need a regulator with powers to fine banks that turn away customers on the premise that they will not be profitable

Stuart Cliffe

Seymour Fortescue, BCSB chief executive, told BBC News Online that some banking staff had not been told that basic bank accounts require less rigid identification safeguards.

The failures exposed by the BCSB will alarm the government.

From April 2003 the Department of Work and Pensions plans to start paying benefits directly into bank accounts rather than over the counter at Post Offices.

The paying of benefits through bank accounts could save the government millions of pounds as it should cut down on fraud.

Not co-operative

According to the BCSB, 13 million people in the UK do not have a current account. Three-and-a-half million of them receive benefits.

The government needs to get these people to open bank accounts so that they can continue to receive benefits.

As a result, banks and building society have been encouraged to offer basic bank accounts.

The BCSB findings cast serious doubts on whether the system will work.

"Without the full co-operation of the banking sector, the government's big idea is impractical," Stuart Cliffe director of the National Association of Bank and Insurance Customers (NABIC) told BBC News Online.

Mr Cliffe said that banks and building societies are being far from co-operative.

"I have received enough complaints from customers to conclude that banks are rejecting low income customers en masse," he said.

The government needs to take strong action before it is too late, said Mr Cliffe.

"We need a regulator with powers to fine banks that turn away customers on the premise that they will not be profitable."