Up to a million payday loan customers could have debts and late fees cancelled after Wonga admitted misselling loans worth £220million.
Debt charities, consumer groups and MPs say other “legal loan sharks” who dished out cheques without making proper credit checks could be forced to take similar action.
Wonga, Britain’s biggest payday lender, has written off the debts of 375,000 borrowers – about one in five – after admitting it failed to check if they could afford repayments.
Campaigners believe a fifth of the five million people to take out payday loans could make similar claims.
They say this could force out of business many of the UK’s 400 such firms – branded legal loan sharks for preying on the poor.
Wonga, which charges interest rates of up to 5,853 per cent a year, has been forced by City watchdog the Financial Conduct Authority to wipe out loans to 330,000 people more than 30 days in arrears.
Another 45,000 who are up to 29 days behind on payments will have their penalty charges and interest cancelled.
Labour MP Stella Creasy, the party’s consumer affairs spokesman, has fought a long campaign against high-cost loans.
She said: “I would be gobsmacked if the FCA were not looking at other payday lenders because this kind of behaviour is widespread across the industry.”
Citizens Advice chief Gillian Guy said: “Half of people who told us about their experiences said they were not asked about their finances before they were given a loan.
“Any business built on exploiting people should not survive.”
About 1.6million people took out a total of £2.5billion in payday loans last year, borrowing on average £260 over 30 days.
But new rules may drive many lenders out of business because the loans will no longer be viable.
The FCA plans to limit interest and fees to 0.8 per cent a day from January and ensure no one pays back more than twice the amount borrowed.
An FCA spokeswoman said: “We are actively regulating the sector and would certainly be concerned about any firm not meeting our rules.”
Wonga boss Andy Haste last week apologised for the firm’s failings.
He said: “There is a real and urgent need for change at this business.”