Labour has called on the Government to give a new financial regulator the power to cap interest rates on payday loans.
Shadow business minister Lord Mitchell said loan-sharking had changed from a "shabby backstreet activity into a recreational pursuit" but the new firms were charging interest rates equivalent to several thousand percent a year.
During committee stage of the Financial Services Bill in the House of Lords, he said: "If you don't repay, it is no longer the baseball bat but the bailiff and the threat your personal credit rating will be shot to pieces.
"Four million people are using these loans and the amounts advanced exceed £2 billion. This is an industry that has enjoyed stratospheric growth - no double dip here."
He said he had investigated how easy it was to get out a £300 loan with Wonga, which he said was the most well-known of the modern firms and had no history in illegal lending.
"They told me they would give me a decision in six minutes and the £300 would hit my bank in 15 minutes," he said.
"They also told me clearly and upfront that I'd have to pay £365 in 21 days. They stated, as they must, that this was equivalent to an annualised interest rate of 4,214%. Totally transparent and totally exorbitant."
He put forward an amendment to the Bill which would allow the Financial Conduct Authority (FCA), a regulator set up by the Bill, to put a cap on the total cost of any loan that would otherwise cause "consumer detriment".
For the Government Lord Newby said he shared many of Lord Mitchell's concerns about the "explosion" of the new type of loan that was available within minutes. He said he was "extremely sympathetic" to many of the things Lord Mitchell was attempting to achieve and said the FCA would have greater powers to deal with the issue.
Peers later completed the committee stage of the Bill, which will be further debated in the Lords next month.