The regulator said this area was a priority because six out of ten complaints to the Office of Fair Trading (OFT) are about how debts are collected.

The review will look at how high-cost short term lenders treat their customers when they are in difficulty. This will include how they communicate, how they propose to help people regain control of their debt, and how sympathetic they are to each borrower’s individual situation.

The FCA said it will also take a close look at the culture of each firm to see whether the focus is truly on the customer – or simply oriented towards profit.

The regulator has already outlined tougher new rules which will see lenders having to carry out proper affordability checks on borrowers before lending.

Martin Wheatley, FCA chief executive, said: “Our new rules mean that anybody taking out a payday loan will be treated much better than before. But that’s just part of the story; one in three loans go unpaid or are repaid late so we will be looking specifically at how firms treat customers struggling with repayments.

“These are often the people that struggle to make ends meet day to day, so we would expect them to be treated with sensitivity, yet some of the practices we have seen don’t do this.

“There will be no place in an FCA-regulated consumer credit market for payday lenders that only care about making a fast buck.”

Around 50,000 consumer credit firms are expected to come under the FCA’s remit on 1 April, of which around 200 will be payday lenders. These companies will initially have an interim permission but will have to seek full FCA authorisation to continue doing credit business longer term.

Payday lenders will be one of the groups that have to seek full FCA authorisation first and the regulator expects a quarter will decide that they cannot meet the FCA’s higher consumer protection standards and leave the market.

Richard Lloyd, executive director of consumer group Which? said: “The payday market is dogged by poor practice and we know borrowers in difficulty are not always treated fairly. This review is another encouraging sign the FCA is showing it means business and won’t tolerate unscrupulous lenders.

“We’d like to see a ban on excessive fees and charges when borrowers default which can be as high as £30. These charges should reflect lenders actual costs.”