WASHINGTON—The Obama administration will announce Thursday the federal government’s first move to regulate high-interest, low-dollar “payday loans,” a $38.5 billion market currently left to the states.

The crackdown on the payday industry—largely storefront lenders extending credit to 12 million lower-income households paycheck to paycheck—follows a series of actions by President Barack Obama and his aides to cement a change in the balance of power between consumers and financial institutions during their last year in office.

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