The Financial Conduct Authority (FCA) will take over regulation of consumer credit from the Office of Fair Trading on April 1, 2014.
Payday loan firms are expected to be a key part of its focus.
The FCA will be inviting feedback from consumers as well as the industry, so that it can put finalised rules in place early next year.
Consumer campaigners have accused payday firms of acting aggressively to claw back debts and encouraging borrowers to roll over loans, trapped with the lender as the cost of the loan escalates.
Russell Hamblin-Boone, chief executive of the Consumer Finance Association (CFA), which represents major short-term lenders operating in the UK, said: "Our tough code of practice has paved the way for FCA regulation, so we look forward to seeing the detail of the draft rulebook."