The Telegraph reports the Public Accounts Committee (PAC) has accused the watchdog of failing to properly regulate or even understand the growing market.
MPs said the watchdog has been “passively waiting for complaints from customers before acting”.
Committee chairman Margaret Hodge said the OFT had “never given a fine to any of the 72,000 firms in this market” and had “very rarely revoked a company’s licence.”
The PAC report found regulatory spending on payday loans was “paltry” compared to other markets.
Hodge said: “It could easily have increased its fees, especially to larger credit card companies who only pay a £1,075 fee, and used that income to raise its game as a regulator.”
The OFT responded: “Far from being timid, the OFT has taken strong, targeted action to tackle the areas of greatest risk to consumers,” it said in a statement. “In the last financial year alone the OFT has revoked the licences of some of the UK’s largest credit brokers and debt management firms.”
It added: “We are disappointed that the committee has not acknowledged the constraints of the legislation under which the OFT currently operates.”