The Office of Fair Trading (OFT) has been dismissed as "ineffective and timid in the extreme" over its regulation of loan sharks by a scathing Commons report.
MPs on the influential public accounts committee expressed outrage that none of the 72,000 firms operating in the market have ever been given a fine by the watchdog.
It attacked the OFT for charging "ridiculously low" licence fees to lenders. This means its resources for regulating the "shabby end of the market", which saw £176 billion lent to consumers in 2011/12, only amount to £11.5 million.
The report claimed consumers were not protected from poor practice because it is too easy for new credit businesses to be set up under a different name.
And it criticised the regulator for "passively" waiting for complaints before acting, suggesting vulnerable people on low incomes falling prey to loan sharks were paying the price as a result.
"The regulatory regime must stop tiptoeing round the problem," committee chair Margaret Hodge declared.
"The OFT and its successor as regulator, the Financial Conduct Authority, need better intelligence and a willingness, when hearing of poor practice by lenders, to crack down swiftly with tough sanctions."
Consumers are thought to be paying up to £450 million a year from falling foul of consumer loans, which see heavy interest rates added to loans which soon become out-of-control debts.
The financial crisis has meant a growth in other types of lending, like home credit and payday lending, which MPs fear need much greater regulation than exists at present.
A crackdown on the 50 largest payday lenders has been announced by the OFT, but Hodge wants immediate plans set out on how the issue will continue to be addressed after the OFT ceases to exist next year.
Its regulatory duties will be taken over the Financial Conduct Authority, which MPs are insisting needs better intelligence after it emerged the OFT did not know how much each firm lends or whether directors of failed companies are in charge of others.
Hodge added: "We will be expecting the OFT to show that this marks the start of a genuine step up from the inadequate approach that was evident at our hearing — and to follow through on its threat to revoke licences if these lenders do not mend their ways."