The "shabby end" of the credit market was costing borrowers £450 million a year, the Public Accounts Committee said, but the Office of Fair Trading (OFT) had not taken the tough action needed to protect consumers.

Committee chairwoman Margaret Hodge said the OFT had been "ineffective and timid in the extreme" in tackling the problem.

The MPs called for the requirement to display the annual percentage rate (APR) of interest on credit to be replaced with a clearer statement of the total amount repayable on the loan, to help consumers understand and compare different products.

Mrs Hodge said: "With money getting tighter and banks lending less, consumers are increasingly having to turn to alternative providers of credit. Some of these lenders use predatory techniques to target vulnerable people on low incomes, encouraging them to take out loans which, when rolled over with extra interest, rapidly become out of control debts.

"Such disgraceful practices by the shabby end of the credit market are costing borrowers an estimated £450 million or more each year.

"Meanwhile, the Office of Fair Trading, the regulator of this sector, has been ineffective and timid in the extreme. It passively waits for complaints from consumers before acting. It has never given a fine to any of the 72,000 firms in this market and very rarely revokes a company’s licence.

"It doesn’t understand the market – how much each firm lends and who its customers are - and can’t be certain if directors of companies that have run into trouble are now running other companies."

She criticised the OFT for failing to increase its £1,075 fee, which applied even to large credit card firms, in order to "raise its game as a regulator" with the extra revenue.

In March the OFT handed 50 payday lenders a 12-week deadline to prove their good behaviour or risk losing their licences to trade, which the MPs said was an "encouraging" step.

Mrs Hodge said: "It is encouraging to see that, since our hearing, the OFT has announced plans to crack down on unscrupulous behaviour by the 50 largest payday lenders.

"We will be expecting the OFT to show that this marks the start of a genuine step up from the inadequate approach that was evident at our hearing – and to follow through on its threat to revoke licences if these lenders do not mend their ways." The report said the OFT "lacks basic information about the consumer credit market, such as the amount of lending by each firm, the products sold by each firm and the types of consumers buying the products".

"It has not attempted to quantify the level of harm due to firms not complying with the Consumer Credit Act. This basic information, broken down by types of consumers and types of products, is essential if the regulator is to better understand the market and target its resources in the most effective way to protect customers", the MPs said.

The OFT will be replaced as the consumer credit regulator by the Financial Conduct Authority next year, and the report said the new watchdog "needs to have a fundamentally different and more robust approach".

"It needs better intelligence so it can prevent consumer harm and it should apply tougher sanctions more swiftly when it is aware of poor practice," the MPs said.

PAYDAY loan firms are trapping families in a "spiral of debt", warned a Huddersfield expert.

Some can cope with the high interest rates charged by the firms, because the loans they take out are small and over a short term.

But economist Kevin Rowles, pictured above, warned that many others are simply unable to meet the repayments and end up even deeper in trouble.

"Some people can cope but they are the minority.

"They may have a household emergency, such as a broken washing machine, and need a small loan to tide them over.

"They may get overtime pay from work and know they can pay off the loan in a week or two with that money.

"But many, many people, both on benefits and in work, have such low income levels that they never have a realistic hope of paying back the loans.

"They never really have a chance to get out of this spiral of debt once they are in".

He spoke out as a new report by MPs condemned the lack of control over the tens of thousands of firms offering so-called payday loans.

Such companies advertise on TV and have outlets in many town centres.

Mr Rowles, of the University of Huddersfield, said: "The country’s economic problems are twofold: the Government debts and household debt .

"The latter affects many families. Often they are on benefits and while we could perhaps manage on benefits for a week or two, the reality is that as soon as there is a financial emergency they run into problems.

"The loan companies operate by offering relatively small loans over short periods, so someone borrowing £100 may have to pay back £110 after a week.

"What causes the problems are the huge annual interest rates, which can run into thousands of percentages, and the high default rates if people cannot afford to repay the original loan.

"In the past people have criticised credit card and store card companies for their high rates and the same principle applies here.

"People who are in work have also seen their real incomes fall dramatically and they too can end up needing help.

"The number of households in West Yorkshire officially classed as poor will increase dramatically in the coming months and years and they may well need to borrow".

HUDDERSFIELD insolvency expert Peter Sargent said the biggest problem with pay day loans is that they can become addictive.

"It is a bit like drugs." he said. "Take one and feel happy, take another and feel happier."

Mr Sargent, a partner at rescue and recovery specialist Begbies Traynor, said: "People take out a loan at a n outrageous rate of interest, struggle to pay it back and take out another loan to repay the original one.

"There is a place for pay day loan companies, but they should be heavily regulated to make sure they lend responsibly and not to people who do not fully understand what they are doing."

But he added: "You also have irresponsible people who find it too easy to borrow money.

"Some people have been known to take a pay day loan on a Saturday evening, collect the money from the cash machine and spend it on a night out," he said.

"People need to be borrowing in a responsible way. If you borrowing from a pay day loan company on a regular basis, you definitely have a problem."

Mr Sargent said: "If people really have no money, the bank won’t give them an overdraft and they have run out of credit on their credit cards, they would be better off approaching a credit union or getting professional advice from a debt charity."

SUPPORT worker Sue Smith deals with some of Huddersfield’s most needy people.

Her clients include the homeless and those with drug or alcohol problems.

But she admits there is a growing concern over other "victims" – those becoming customers of loan sharks and payday loan companies.

She has heard horror stories of people risking losing their homes because of repayments to companies and of people with mental health issues being offered cash on exorbitant terms.

Her concerns come as a new survey shows customer dissatisfaction with financial firms has reached record levels.

There were 500,000 new complaints dealt with in the last year, the Financial Ombudsman Service revealed.

And among that number was a big rise in complaints about payday loan companies.

There were 542 complaints about payday lenders, marking an 83% year-on-year increase.

Many complaints about payday firms involved them unexpectedly draining struggling borrowers’ accounts of cash.

Mrs Smith works in Huddersfield with the charity Homeless Alcohol and Drug Support.

She has more than 80 clients, often referred to her through drop-in advice centres at the Huddersfield Methodist Mission or through health services.

"One client of ours has been targeted repeatedly. He searched on the internet and came up with a loan company who gave him money but then demanded big repayments and passed on his details including his bank account to other companies.

"We also had a couple with mental health issues who came to us having been targeted.

"I believe many people are turning to the payday loan companies or loan sharks for help without realising how much trouble it can bring.

"They get landed with high repayment charges, with so-called membership fees and with text messages offering them even more money, which sounds so tempting at the time.

"I worry that many of them are likely to come to harm by turning to these people,"

Natalie Ceeney, chief ombudsman, said: "We have seen a much stronger consumer voice in the last year with people becoming more aware of their rights and less willing to put up with poor customer service.

"As levels of confidence in financial services have eroded, it is disappointing that we still haven’t seen any significant improvement in complaints handling".

Payday loans are huge business.

A search on Google under "payday loans" brought an astonishing 82m responses.

Fresh evidence of "out of control" payday lenders failing to act responsibly and hounding people for money was released by a debt advice charity.

Citizens Advice said it had seen cases in recent months which included payday lending to people who were aged under 18, had mental health issues or were drunk when they took out the loan.

The Citizens Advice analysis came from 780 cases reported to it between November 2012 and May this year.

It also found that people were being chased for loans they had never taken out and customers were being "hounded" at their home to shame them into paying up.

Struggling borrowers’ bank accounts were being drained of cash "without any warning" by lenders using a type of payment agreement called a continuous payment authority (CPA), the charity said.

The Huddersfield group runs drop-in advice sessions each Thursday (10.30am-noon) at The Sikh Leisure Centre in Springwood.

SUPPORT worker Sue Smith deals with some of Huddersfield’s most needy people.

Her clients include the homeless and those with drug or alcohol problems.

But she admits there is a growing concern over other "victims" – those becoming customers of loan sharks and payday loan companies.

She has heard horror stories of people risking losing their homes because of repayments to companies and of people with mental health issues being offered cash on exorbitant terms.

Her concerns come as a new survey shows customer dissatisfaction with financial firms has reached record levels.

There were 500,000 new complaints dealt with in the last year, the Financial Ombudsman Service revealed.

And among that number was a big rise in complaints about payday loan companies.

There were 542 complaints about payday lenders, marking an 83% year-on-year increase.

Many complaints about payday firms involved them unexpectedly draining struggling borrowers’ accounts of cash.

Mrs Smith works in Huddersfield with the charity Homeless Alcohol and Drug Support.

She has more than 80 clients, often referred to her through drop-in advice centres at the Huddersfield Methodist Mission or through health services.

"One client of ours has been targeted repeatedly. He searched on the internet and came up with a loan company who gave him money but then demanded big repayments and passed on his details including his bank account to other companies.

"We also had a couple with mental health issues who came to us having been targeted.

"I believe many people are turning to the payday loan companies or loan sharks for help without realising how much trouble it can bring.

"They get landed with high repayment charges, with so-called membership fees and with text messages offering them even more money, which sounds so tempting at the time.

"I worry that many of them are likely to come to harm by turning to these people,"

Natalie Ceeney, chief ombudsman, said: "We have seen a much stronger consumer voice in the last year with people becoming more aware of their rights and less willing to put up with poor customer service.

"As levels of confidence in financial services have eroded, it is disappointing that we still haven’t seen any significant improvement in complaints handling".

Payday loans are huge business.

A search on Google under "payday loans" brought an astonishing 82m responses.

Fresh evidence of "out of control" payday lenders failing to act responsibly and hounding people for money was released by a debt advice charity.

Citizens Advice said it had seen cases in recent months which included payday lending to people who were aged under 18, had mental health issues or were drunk when they took out the loan.

The Citizens Advice analysis came from 780 cases reported to it between November 2012 and May this year.

It also found that people were being chased for loans they had never taken out and customers were being "hounded" at their home to shame them into paying up.

Struggling borrowers’ bank accounts were being drained of cash "without any warning" by lenders using a type of payment agreement called a continuous payment authority (CPA), the charity said.

The Huddersfield group runs drop-in advice sessions each Thursday (10.30am-noon) at The Sikh Leisure Centre in Springwood.