The Office of Fair Trading (OFT) said it decided to refer payday lenders for a full investigation by the Competition Commission because it continues to suspect that features of the market "prevent, restrict or distort competition".
The "fundamental" problems the trading watchdog has found, such as loans becoming far more expensive than struggling borrowers had expected, cannot be tackled by existing laws and guidance, it said.
The Office of Fair Trading (OFT) decision is the culmination of a large-scale investigation into the £2 billion payday sector, including spot checks on household names such as Wonga.
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