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RALEIGH — Lenders who make loans under $10,000 could see the fees and interest they’re allowed to charge go up if a legislative study committee sides with their industry.

A committee studying the “modernization” rates and fees businesses can charge for small loans is also due to consider raising the cap for such loans at $20,000. The committee could make a recommendation for action in time for the session of the General Assembly that starts in May.

Members of the group heard Thursday from businessmen who said fees are too low and consumer advocates who urged lawmakers to lower the rates further.

“I’m not going to make a loan at 18 percent if I can’t make a profit,” said C. Everett Wallace, who heads the N.C. Credit and Personal Finance Council.

Loans under $2,000 are particular problems, he said, because they cost $200 or more to make but often only generate profits of $40 or $50.

“I want a rate of interest that reflects the possibility I could lose my money.”

He said small lenders have higher costs than credit card companies because they don’t rely on credit scores and other new technology. Rather, small loans are based on interviews and individual budgets.

Although rates charged by these lenders are small in terms of raw dollars, they can be as high as 30 to 40 percent when the total loan payback is calculated, say consumer advocates.

“The last thing we need to be doing is hitting people who might be using these loans with more fees and higher interest,” said Chris Kukla with the Center for Responsible Lending. “The profit margin may not be as high as you like, but it doesn’t mean you’re not making a profit.”

Kukla pointed to data from the N.C. Commissioner of Banks that showed some 75,000 loans under $1,000 were made in 2008.

“I find it hard to believe that 20 percent of their market is a loss leader,” Kukla said.

The committee charged with sorting out these competing claims includes Robert Braswell, head of Greensboro-based Carolina Bank.

He said few traditional banks get into the business of issuing small, unsecured loans because of the low profit margins involved.

However, as federal regulators tighten credit card rules, Braswell said those who make small loans could see an uptick in business.

“There will be a chance that there will be more consumers seeking out this product than in the past,” he said. “We need to look forward to make sure we have suitable outlets to meet the needs of all North Carolina customers.”

State Sen. Don Vaughan, a Greensboro Democrat, said he has been approached by several small lenders about the topic. “Certainly for people who are in turmoil, these loans can be vitally important,” Vaughan said.

Contact Mark Binker at (919) 832-5549 or mark.binker@news-record.com