An estimated 4.1 million people are in financial difficulty owing to missed domestic or credit bills, a major study has found.
These consumers - most likely to be aged between 25 and 34 - have failed to pay bills in three or more of the last six months.
The findings come as part of a survey of 13,000 people by the regulator, the Financial Conduct Authority (FCA).
It suggests 25.6 million consumers could be vulnerable to financial harm.
This means that they display at least one of a series of issues, such as lack of internet access or an overdraft, so their finances would be at an increased risk if something went wrong.
The Financial Lives research, the first of its kind by the regulator, revealed a range of concerns among consumers at a time of weak wage growth, but also low-cost credit.
It concluded that 15 million people had low levels of resilience to a bill shock, that eight million were struggling with debt, and 100,000 had used an illegal money lender in the last 12 months.
One in six (17%) of those with a mortgage or who are paying rent, an estimated five million people, said that they would struggle if monthly payments rose by less than £50.
A rise in interest rates, heavily hinted by policymakers at the Bank of England, could affect many of these people - especially if the Bank rate rose rapidly.
In the same week as the BBC News Money Matters series revealed worrying levels of debt among young adults, the FCA report highlights the issue again for 25 to 34-year-olds.
Its findings show that 23% of consumers of this age were "over-indebted", the highest proportion of any age group.
The report also found that this group were most likely to be in difficulty (13%) or just surviving with their finances.
"This [research] exposes the story around the scale of those who are potentially in difficulty in the younger generation," said Christopher Woolard, executive director of strategy and competition at the FCA.
He added that there were "challenges" faced by every age group and that flexibility was required to ensure that these various issues were tackled.
The report revealed:
Gareth Shaw, from consumer group Which?, said: "That such a high number of people in middle-age have not properly considered how they will manage in retirement should be cause for concern.
"The current complex pensions system is leading to disengagement, leaving consumers vulnerable through the real lack of information, support and tools needed to empower consumers to make informed decisions about their financial futures.
"Today's figures should spur on the FCA to take action to deliver a consumer-friendly pensions system that everyone can engage with."
The FCA said that the survey would provide a "wealth of information" that would be used when deciding how to protect vulnerable consumers in the future.