Payday loans creating debt problems
It has seen the number of people approaching it with debt problems as a result of taking out payday loans quadruple in the last two years.
However, Consumer Minister Ed Davey argues that a stricter regime could push people into the hands of illegal loan sharks.
What are payday loans?
Payday loans, which typically last for 30 days and are designed to tide borrowers over until their next pay day, usually cost between £20 and £35 - based on a loan of £100.
However, some providers charge more than this. Recent research by consumer champion Which? found that a company called Wonga was quoting £36.72 for a 30-day loan of £100 - equivalent to an APR of 4,394%.
Despite the high interest rates, however, for many people a payday loan is a quick, legal way of getting hold of short-term credit. And the charges are limited if the loans are repaid within the term agreed.
Debts can quickly escalate if the loans are rolled over, though, which is why some people have landed themselves in hot water.
Is tighter regulation a good idea?
The Citizens Advice Bureau claims that the current regime governing the sale of payday loans is to blame for the debt problems of many of its clients.
Peter Tutton, from the Citizens Advice Bureau, said "The regulatory regime isn't working to protect people, so there's work for the government to do.
"The government needs to look at consumer credit and get really serious about making it more effective. We need better sorts of messages to firms that it's not acceptable to treat people badly."
However, the government is concerned that cracking down on payday loan providers will leave those struggling for cash no option but to turn to illegal loan sharks.
Davey said: "In the last government - the Labour government looked at capping interest rate costs of credit three times.
"And the last Labour government rejected it three times because they were concerned that they would push vulnerable consumers into the hands of these illegal money lenders who are really the nasty of the nasty."