Payday lenders are to be investigated by the Office of Fair Trading (OFT) over concerns customers are not being treated fairly.
The review will involve visits to 50 lenders and could, the OFT said, result in enforcement action.
It is concerned that firms may have been giving out loans to borrowers who are unlikely to be able to repay.
There have also been worries about lenders allowing customers' debts to spiral by rolling them over.
The OFT said evidence gathered from its visits would be used to boost standards across the sector.
David Fisher, OFT director of consumer credit, said: "We are concerned that some payday lenders are taking advantage of people in financial difficulty.
"This is unacceptable. We will work with the trade bodies to drive up standards but will also not hesitate to take enforcement action, including revoking firms' licences to operate where necessary.
"The payday sector has grown considerably since the OFT's high cost credit review in 2010. This, combined with the current tough economic conditions makes it the right time for us to review the industry and improve protection for consumers."
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