Washington has been a leader in payday loans, which is not necessarily a blessing. The state's mid-1990s allowance for writing postdated checks to pay off short-term loans approved a dubious, otherwise illegal practice.

The Legislature should return some rationality to the lending practice with a cap of 36 percent interest on loans that target hard-working, financially squeezed segments of the population. The industry says it can't operate on such a tight margin; if so, perhaps it will be just as well for the public.

There is a need for short-term, relatively small loans in the hundreds of dollars. Credit unions ought to be pushed into filling more of the demand, and doing so in a way that educates borrowers often caught in desperate cycles of debt, high-interest loans and impossible repayment obligations. The coalition of labor unions, churches and anti-poverty groups proposing the interest cap in HB 1020 also could organize better lending and credit education.

Effective annual interest rates on the loans today can run around 390 percent. There's nothing magic about the 36 percent limit sought by Poulsbo Democratic Rep. Sherry Appleton. But given the choice between that and 390 percent, lawmakers should insist on overcoming any roadblocks set up by Ways and Means Committee Chairwoman Sen. Margarita Prentice and returning some sanity to lending.

On the Net: P-I Editorial Board interviews with representatives of two sides of the issue are at: seattlepi.nwsource.com/podcast/opinionleaders

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