Representatives of the UK's biggest payday lenders have been accused, by the Consumer Minister, of failing to get their house in order.
It follows an admission that they don't always share data with each other, meaning borrowers can run-up debts by taking out multiple loans. The lenders were speaking at a one-off session in Parliament.
ITV News Consumer Editor Chris Choi reports
The Citizens Advice Bureau has told ITV News that they want the government to ban payday loan advertisements from children's TV channels.
Gillian Guy the Chief Executive of the CAB told ITV's Consumer Editor Chris Choi that children put pressure on their parents to get loans due to the adverts.
Payday firms say they make careful affordability checks. These are supposed to ensure the companies don't lend more than a borrowers can repay.
But today they admitted to a worrying blind spot. It's possible for someone to take out a series of short term loans all around the same time, without the payday firms realising the individual is becoming over-stretched.
The spokesman for Mr lender, Adam Freeman, admitted it could be 60 days before they get the information. Wonga's Henry Raine agreed that better data sharing is needed to plug the information gap.
The pay day loans lender Wonga has rejected claims by the Labour Leader Ed Miliband that they prey on vulnerable people.
– Wonga Statement
While we recognise that there have been unacceptable practices in the sector, Wonga has been instrumental in raising standards and arguing for better regulation to protect consumers.
We have used technology to bring competition into traditional financial services for the benefit of people across the country. We invite Mr. Miliband and his colleagues to view our film and meet us to discuss how best to serve the popular need for consumer credit in a successful 21st century economy.
MoneySavingExpert.com founder Martin Lewis has told MPs "we'd all be a lot better off" without payday lenders.
He told the Commons Business, Innovation and Skills Select Committee: "Do we really need them (payday lenders)? I think we'd all be a lot better off without them and maybe it's worth the sacrifice for the few small number of people who actually do find them rather convenient.
"If you take 100 people who get payday loans, I would suspect 99% of them would find a cheaper and better alternative doing something else or not doing them.
So the problem is they're used by far too many people and they are not fit for the purpose that they are used for."
Payday lenders insisted their affordability checks are similar to those used by credit card firms as they were grilled by MPs on being able to make cash available to borrowers within minutes.
Asked about advertising stating that lenders can send cash within five or 10 minutes, Andy Lapointe, UK public affairs manager at QuickQuid, said: "That's from approval."
He said the process of credit checking could actually take several hours, adding: "The five minutes is indicating the time that they're approved."
Russell Hamblin-Boone, chief executive of short-term lending trade body the Consumer Finance Association, said: "When you're transferring money electronically you can do that very quickly.
"If you applied for a credit card, the application process would be as long as if you were applying for a short-term loan.
"The difference would be that you'd have to wait a few weeks for your credit card to come through as opposed to lenders who are able to transfer money directly."
The Labour leader Ed Miliband has launched an attack on the payday loan industry.
Recalling stories of people he had spoken to recently that had been "preyed upon by payday lenders", he said:
"Last night the boss of Wonga said he was speaking for the ‘silent majority’, who are happy with their service.
"But the truth is he wants us to stay silent about a company where in one year alone their bad debts reached £120 million.
"An industry in which seven out of ten customers said they regretted taking out a loan.With half saying they couldn’t pay it back.
"Payday lenders don’t speak for the silent majority. They are responsible for a quiet crisis of thousands of families trapped in unpayable debt."
Appearing before MPs, Wonga's head of regulatory and public affairs, Henry Raine, defended the company's business model:
"Wonga's business is aimed to lend to people that can pay us back that's how we make money.
"The vast majority of people pay us back on time. We freeze interest after 60 days, 25% of people pay us back early.
"We are lending to vast numbers of people small sum credit and I think it's fair to say those figures frankly compare favourably with other lenders in the industry including credit cards and banks".
As firms including Wonga were being questioned by MPs over the controversial issue of payday loans, the Labour leader Ed Miliband tweeted:
The Wonga economy is one of the worst symbols of Britain’s cost of living crisis. More in my speech later.
Consumer Minister Jo Swinson has said a "huge amount" had already been done by the Government to tackle concerns over payday lending.
She told Daybreak: ""We are already taking enforcement action which has seen 25 payday lending firms leave the market in their entirety".
"While ... some customers manage OK with this type of lending when it is for an unbudgeted emergency, when it is actually a sign of deeper financial problems, if you can't afford to make ends meet at the end of the month, then actually what people need is not a loan, it is some debt advice."