Some people have struggled to repay payday loans and found themselves in a spiral of debt
"Deep-rooted" problems in the loans business will be the subject of a summit involving payday lenders, regulators, charities and ministers.
The industry, worth £2bn, was referred to the Competition Commission by the Office of Fair Trading last Thursday.
Consumer groups say some firms charge excessive rates and make it difficult to compare the full cost of loans. The industry says it is already changing.
Consumer affairs minister Jo Swinson will host Monday's meeting.
'Excessive charges'Ahead of the meeting, the executive director of consumer group Which?, Richard Lloyd, called on the government to take action over the "toxic market".
He said: "We want new rules banning excessive charges, a restriction on the number of times a payday loan can roll over and clearer advertising to help people struggling with spiralling debt."
The Citizens Advice charity has accused the payday loan sector of being "out of control".
The lenders said they were already changing their practices. A new regulator, the Financial Conduct Authority, will oversee payday lenders from next April.
The OFT said it found that customers found it difficult to identify or compare the full cost of payday loans.
It added that there were barriers to switching between lenders when loans were rolled over.
The OFT said it was also concerned that competition was based on speed rather than cost.
'Short-term access'It said some of the business models of companies caused concern because they were "predicated on making loans which are unaffordable, leading to borrowers paying far more than expected through rollovers, additional interest and other charges".
Lenders appeared to make 50% of their revenues from such practices, it added.
The OFT questioned the use of phrases by some companies such as "instant cash", "loan guaranteed" and "no questions asked".
Payday loans, used by about two million people in the UK, are designed as short-term access to cash at relatively high cost until the loanee is next paid.
However, in many cases, individuals have struggled to repay and the compounded interest of loan after loan has left them in a spiral of debt.
The body which represents payday lenders, the Consumer Finance Association, said it welcomed well-designed regulation but was unhappy about the scrutiny that the industry had received.
Source: BBC News - Business http://www.bbc.co.uk/news/business-23116538#sa-ns_mchannel=rss&ns_source=PublicRSS20-sa
