The consumer watchdog has accused payday loan companies of "irresponsible lending", "pressure tactics" and other bad practices.
The OFT has given them them 12 weeks to prove they provide an important service, or else they could face closure.
However, there will be no cap on interest rates.
Consumer Editor Chris Choi reports:
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A year ago the International Court of Justice ruled that Japan's decades-old whale hunt in the Antarctic should stop.
Shadow chancellor John McDonnell has backed a free vote for MPs on the issue.
Savers into the new scheme can expect rates as high as 4 per cent from some banks.