The rules, which come into force on 1 April, include mandatory affordability checks for payday borrowers and will force debt management firms to pass on more of the client’s money to creditors from day one of the plan.

Martin Wheatley, the FCA’s chief executive, said: “Our new rules will help us to protect consumers and give us strong new powers to tackle any firm found to be overstepping the line.”

The consumer credit market is estimated to be worth £200bn a year with approximately 50,000 firms operating in the sector.

FCA regulation will apply to any firm or individual offering overdrafts, credit cards and personal loans, selling goods and services on credit, offering goods for hire, or providing debt counselling or debt adjusting services to consumers.

Wheatley’s watch will have stronger powers to clampdown on poor practice than its predecessor the Office of Fair Trading including the authority to ban misleading payday adverts.

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Further major changes facing the payday and debt management sector are;

• a limit of two loan roll-overs for payday loans in the event of non-payment
• restricting (to two) the number of times a firm can seek repayment using a continuous payment authority – effectively an open door to a borrower’s bank account
• a requirement to provide information to customers on how to get free debt advice

The FCA will be monitoring these firms along with credit cards to make sure customers are being treated fairly with the threat of enforcement action and customer redress should firms fail to do so.

The final guidance outlines a robust authorisation gateway to ensure that any firm or individual authorised to do consumer credit business is fit and proper, and that firms have suitable and sustainable business models.