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Practices in payday loans call for review

It is encouraging to hear that a U.S. senator has opened a public discussion of the problems associated with some "payday loan" operations.

The loans, which attract customers who are in need of quick cash, all too often turn into long-term financial entanglements that involved interest rates of more than 1,000 percent and payoffs that are hundreds of times the amount of the original loan.

Of course, every payday loan does not involve such abuses.

The premise of the loan is spending a paycheck before it is received. The borrower writes a check to the lender, dated the day of the next payday. The loan is the amount of the paycheck, minus the interest fee. On payday, the lender either cashes the check or "rolls over" the loan, often at a higher interest rate.

Because the borrower has spent the paycheck before it is received, many times this cycle continues, with the amount of the loan -- and the interest -- increasing.

Investigation of the payday loans and the related practices is likely to show the need for at least a limit on interest rates. Because this type of loan appeals to people who would fall into financial trouble the easiest, restrictions on availability might also be considered.

There are enough instances of financial devastation linked to these loans to warrant congressional review.