Border agency officials are conducting unlawful passport checks on buses to try to catch illegal immigrants, a previously undisclosed tactic that has infuriated civil liberties campaigners.

Documents seen by the Observer reveal that staff from the UK Border Agency have been "regularly" targeting coaches at bus stations "to prevent illegal migrants from making use of the public transport network".

However, the practice appears to be illegal, with officials only authorised to examine passengers at air or sea ports. One bus passenger subjected to the identity checks described them as "harassment" and behaviour that had no place in a democratic society.

The revelations follow news that the head of the agency, Brodie Clark, and two senior officials were suspended on Friday amid claims that thousands of passport checks were not carried out during the summer. It is alleged that staff were told to relax identity checks on non-EU nationals during July – the period when it appears officials began targeting bus passengers.

Campaigners claimed the policy contradicted government pledges to roll back state surveillance. The first law passed by the coalition concerned the scrapping of ID cards to "begin the process of reversing the erosion of civil liberties and restoring freedoms".

James Welch, legal director for the human rights group Liberty, said: "You expect to show your passport at an international airport, but not at a local bus station. The idea of officials bullying coach passengers into proving they have a right to be in Britain is deeply distasteful. The UKBA has some serious explaining to do if it is routinely carrying out such abusive and unlawful inspections."

The disclosure follows a complaint by a coach passenger questioned by Home Office officials after he arrived in Liverpool during June. A letter from the agency to the complainant reveals that such "intelligence-led operations" are "regularly held at various public transport hubs".

Written by a UKBA inspector based in Liverpool, it cites a list of locations in his region where officials frequently check bus passengers, including Liverpool Lime Street, Liverpool Central and Crewe.He explains that someone who cannot satisfactorily prove their identity and nationality are removed from the bus "so as not to unduly hold other passengers up."

The inspector adds: "As coaches arrive at Norton Street [in Liverpool] during an operation, they are usually boarded by two immigration officers at least one of whom should introduce themselves."

However British-born Pete Clark, 56, from Liverpool, has described that he had no idea who the officials were when they physically blocked him leaving a National Express coach travelling to the city from Leeds until the passengers revealed identification "deemed suitable."

"None of the persons involved gave an explanation of who they were, what they were doing and on which authority." he said "Their attempt to prevent passengers from going about their lawful business amounts to harassment."

He said that he had recently been working in Africa and had witnessed the heavy-handed behaviour of police and state officials acting on suspicion of illegal behaviour: "I have always considered the country of my birth to be free of this sort of constant intimidation. Sadly, this seems not to be the case. Such routine actions under repressive regimes worlwide have no place in a free democracy such as the UK."

In a letter to Clark, the UKBA explain that the intelligence operations on coaches were permitted under the immigration act 1971. Yet the act itself states only: "An immigration officer may examine any persons who have arrived in the United Kingdom by ship or aircraft."

A UKBA spokesman said they were looking into the issue. Last week it emerged that border officials have lost track of a population of asylum seekers and migrants the size of Cambridge. A report by MPs quoted UKBA statistics showing the number of "lost" cases had tripled in six months from 40,500 in March to 124,000 in September. Yvette Cooper, Labour's shadow home secretary, said yesterday: "This Tory-led government is making our borders less secure by cutting over 5,000 officers from the UKBA."