It found that some logbook lenders, firms using a consumer’s vehicle as security, were not carrying out affordability checks and were encouraging applicants to falsify their income.
Consumers were also being put on the spot to take out a loan without being given the statutory cooling-off period which comes with all Consumer Credit Agreements.
In some cases applicants were unaware that missed payments could lead to the repossession of their vehicles.
Christopher Woolard, director of policy, risk and research at the FCA, said: “People who use logbook loans are often in difficult circumstances with few other borrowing options.
“The last thing that should be happening is for them to be squeezed yet more or even threatened but that is what our research has found.”
Logbook loans range in size from about £500 to £50,000 with the average amount borrowed about £1,000.
Loans, which can be approved in a few hours, usually last between six to 18 months with a typical APR of 400% or higher.
Logbook lenders came under the control of the FCA in April when the regulator took over governance of consumer credit from the Office of Fair Trading with tougher powers to clamp down on poor practice.
Consumer credit firms had to apply for an interim permission to continue to lend before 1 April.
All firms will need to apply for full permission from 1 January 2015 and before 1 April 2015 which can be withheld if they are failing to treat customers fairly.
“Logbook lenders should consider this as fair notice to improve and put their customers first or we won’t hesitate to take action,” said Woolard.
Any firms that can’t meet the tougher requirements will not be authorised.