A consumer group has demanded regulators crack down hard on payday loan firms amid research suggesting 57% of customers have incurred stiff penalty charges for missing payments.
Which? claims 29% of people who go to payday loan firms - which can apply annual interest rates of more than 4,000% - do so in the knowledge they have no chance of paying back what they owe within the timescale of the loan deal.
The industry is designed to offer short-term loans to people to cover bills until pay day - with the interest rate climbing steeply if the terms are breached.
It has led to revelations that some borrowers have ended up owing thousands of pounds after taking out loans for just a few hundred.
According to Which?, 20% of people who took part in its survey complained of being hit by unexpected charges.
An increasing number were using payday loans to cover essentials such as food as the squeeze on household budgets continued to be felt, the group said.
Its Executive Director Richard Lloyd said: "It's shocking that half of all people taking out payday loans have been unable to pay the money back and it's a depressing sign of the times that almost a third were hassled by debt collectors in the past year.
"Payday loans are leaving many people caught in a spiral of debt and taking out more loans just to get by.
"That's when they're hit by excessive penalty charges and rollover fees," Mr Lloyd added.
"The Office of Fair Trading must do more to clamp down on irresponsible lending by introducing tighter rules for payday lenders.
"Better affordability assessments and clearer charges would be the first steps to clean up the industry and better protect consumers."
The industry has defended itself by insisting customer satisfaction levels are high and they are offering a financial lifeline to people at a time when mainstream banks are largely ignoring the needs of their customers.