PAYDAY lenders are facing new rules on how they advertise under a Government clampdown to make sure that firms do not take advantage of people who are already drowning in debt.

The plans include limiting the number of adverts firms are allowed to put out per hour, the times they can advertise and forcing them to make sure that interest rates are clearly displayed.

The Government will work with the Advertising Standards Authority and the industry to make sure advertising does not tempt consumers into taking out payday loans that turn out to be unsuitable.

The clampdown emerged as the trading watchdog prepares to publish the results of a wide-ranging probe into the payday lending industry today.

The Office of Fair Trading (OFT) has carried out spot checks of 50 major lenders and obtained information from all 240 lenders in the market.

The regulator said in its interim report last autumn that formal investigations have been launched into several firms over their debt collection methods.

Charities have reported rocketing numbers of complaints about payday lenders from borrowers. The Money Advice Trust (MAT) recently said that complaints about payday loans have doubled year-on-year to reach a record of 20,000 across 2012.

The charity warned that “something is drastically wrong” with the way that expensive loans are being dished out to people who cannot afford them, with lenders often rolling over loans.

New regulator the Financial Conduct Authority (FCA), which will oversee the consumer credit market from next year, has committed to prioritise tighter rules on payday lending that could come into effect from April 2014.

The FCA’s rules will be binding and if they are broken the regulator will have tough enforcement powers including imposing unlimited fines and the ability to claw consumers’ money back.

The University of Bristol has been looking into whether capping the cost of high-cost credit is an option. Its research found that a cap on credit is not the right answer at this time, but if this were to change due to market conditions, the FCA will have powers to look again at this possibility.

The Government is also planning to do more to encourage greater communication within the industry to stop consumers taking out multiple loans from different lenders.

Economic Secretary to the Treasury, Sajid Javid, said: “The Government is introducing a fundamentally new approach to regulating consumer credit, which will ensure that irresponsible firms and bad practice will have no place in the consumer credit marketplace.

“Consumers can have greater confidence that the new FCA will intervene early and decisively in their interests - thanks to its more focused remit, objectives and powers.”

Business Minister Jo Swinson said: “We recognise that stronger powers are needed to crack down on unscrupulous behaviour.”

Appearing on BBC Breakfast, she said of the FCA: “That’s going to be a body that has much stronger powers to be able to ban certain products, to be able to stop lenders entering the market if they can’t prove that they have a sound business model and they’re going to act responsibly, and they’ve also got the power if necessary to set an interest rate cap.

“Although the evidence at the moment doesn’t point to that being the best solution, because actually, some of the biggest problems are things like not having proper affordability assessments done so the people that should be getting debt advice are ending up getting more debt instead.

“This is going to be a very strong regulator.”

Consumer group Which? recently found that 79% of people, equating to around 38.5 million adults, use some form of credit.

The group recorded evidence of how households are turning to high cost credit after exhausting cheaper forms of borrowing. Half of people who used a payday loan or dipped into an unauthorised overdraft said they had been rejected for credit in the past year.

Which? executive director Richard Lloyd said: “It’s time for a crackdown on irresponsible lending, especially for high cost lenders who are exploiting consumers struggling in the current economic climate, so we’re pleased to see the Government planning tough action.

“We want to see the regulators immediately crack down on payday lenders who flout the rules and for new powers to be used to take strong, proactive action to clean up the whole of the credit market.”