Payday loan companies are 'out of control' and have been found lending to people with mental health problems, drunks and children, Citizens Advice has warned.
Citizens Advice also looked at customer feedback on 2,000 payday loans from more than 100 lenders, which was provided between November and May.
In almost nine out of 10 cases, borrowers were not asked to hand over documents to show they could afford the loan.
Three-quarters of people questioned said that they struggled to repay the loan and 84pc of people with repayment problems were not offered the chance to have their interest and charges frozen.
Last month Citizens Advice called on high-street banks to offer personal micro-loans as a responsible alternative to a payday loan.
The OFT said it has received confirmation from 48 out of 50 lenders that they intend to prove to the regulator that they are acting within the rules.
An OFT spokesman said: "Of the 50 payday lenders that were inspected during the compliance review, 48 have confirmed that they will provide the OFT with proof that they are fully compliant, while two have surrendered their licences.
"The OFT has also announced that it has formal investigations open into the practices of three payday lenders and, in addition, three payday lenders have also had their licences revoked since the review of the sector in March."
Payday lenders recently signed up to new codes of practice to improve affordability checks and make sure customers understand the costs involved.
Earlier this month, payday lenders pressed MPs not to bracket all their customers as being "vulnerable".
The Consumer Finance Association (CFA), which represents short-term lenders, presented a report on their customers to a gathering of MPs in Parliament, which argued they were generally "intelligent, financially-savvy consumers".
The report, titled Credit Crunched, found that more than one third of payday borrowers had an income of between £10,000-£19,999.
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