The Ombudsman said it had taken on 613 new cases in eight months from consumers following complaints this year, or a rise of 20% year-on-year.
The financial watchdog said it consistently found in consumer’s favour in roughly two-thirds of cases, according to its insight report.
It called the treatment of vulnerable customers ‘alarming’, pointing to a variety of problems including lender unwillingness to accept suitable repayment plans, poor administration, damage to credit records and even fraud attempts.
Meanwhile, following the FCA’s proposals to price cap payday loans in July, a CMA consultation out today includes proposals to establish a high quality price comparison tool for the payday lending sector to produce quick and accurate product quotes.
The CMA said this would help establish new lenders and challenge existing suppliers by offering better deals for borrowers.
Lead generation websites also come under scrutiny and may be expected to explain their role as customer generators because many borrowers mistake these companies for lenders, it said.
Other CMA proposals intended to increase competition in this market include measures to help borrowers shop around without damaging credit records, data-sharing and fee charging summaries for each customer.
The consultation ends on 30 October and the CMA plans to report on findings by the end of the year.
Simon Polito, chair of the Payday Lending Investigation Group said: “Greater price competition will make a real difference to the 1.8m payday customers in the UK. At the moment there is little transparency on the cost of loans and partly as a result, borrowers don’t generally shop around and competition on price is weak.”