The Irish League of Credit Unions has written to its 400 members across the country asking them to drum up support among their local TDs for the move, which would water down many of the limits on credit union lending.

Applying pressure to TDs, who are increasingly jittery as the election approaches, is the latest front in the credit unions' long-running battle with regulator Brendan Logue. He opposes any relaxation in the existing limits, fearing that many credit unions do not have the skills to lend money for long periods, especially when most of the money they collect in savings is repayable on demand.

The lending restrictions have all but locked credit unions out of the lucrative mortgage market, although some act as tied agents of the banks and building society to get a foothold in the sector.

Waterford Credit Union has teamed up with EBS in recent weeks following a similar alliance reached last year between Bishopstown Credit Union in Cork and IIB Homeloans.

Because of their presence in almost every town and village in Ireland, where an army of 9,200 volunteers makes many of the key decisions, credit unions are one of the most powerful political forces in the country. In the past they forced former finance minister Charlie McCreevy into a humiliating climb-down when he tried to slap Dirt tax on the dividends paid on savings .

Liam O'Dwyer, chief executive of the ILCU, said the regulator and officials at the Department of Finance had already accepted many of the changes being sought by the movement. But the big sticking point is section 35 of the 1997 Credit Union Act, which limits the amount of money that can be lent for more than five years to 20% of a credit union's loan books, with no more than 10% available for lending over ten years or more. The league wants these limits doubled to 40% over five years and 20% over ten years.

"We've asked our members in all constituencies to raise the matter with their TDs to ensure they're aware of our concerns, " O'Dwyer said. "This is a competition issue and Section 35 severely restricts our development in terms of lending. It dates from 1997 when Ireland was a completely different country.

We have the funds and we're keen to lend them to the members."

Credit unions are sitting on huge surplus funds, with 14bn in savings and deposits but only 7bn in loans to their two million members. But to get a change a law, they will have to address growing worries over credit control. Rumours of a bad debt crisis sparked a run on Monaghan Credit Union earlier this year, while a leaked internal memo from the ILCU has warned that some credit unions face bankruptcy because of bad debts.