UK regulator, Office of Fair Trading (OFT) has warned the payday loan industry to improve the way lends to the customers or face fines.

OFT said in an interim report that it inspected 50 large firms and most of them were not following its rules. The regulator expressed concerns over the reckless lending and aggressive debt collection in the industry. OFT has already initiated investigations into aggressive debt collection practices at several payday lenders in the UK.

The regulator is expected to publish a whole year report in the New Year after it concludes its investigations that began in February, 2012. David Fisher, the OFT's director of consumer credit said that the regulator has issued notices to 240 payday lenders to improve practices. OFT was particularly concerned over repayment agreement called a continuous payment authority (CPA) that includes automatic repayment through credit or debit cards.

"What we are discovering is that right across the sector problems exist and the industry as a whole certainly needs to raise its game," he said.

The report also noted that the industry was industry was now lending £1.8 billion a year. The amount is about double the level recorded just two years earlier.