A bill to help protect servicemen and families from “predatory” payday loan companies was introduced in Parliament yesterday by Gareth Thomas MP.

The Credit Union (Armed Forces) Bill aims to address growing fears that low-paid service personnel are turning to payday loan companies when in need of financial help at the end of each month. It calls for a military credit union to be established to help them access low-cost short-term loans.

Thomas, the former shadow minister for civil society and a former Co-op Party chair, said: “With even our soldiers and sailors now being targeted by payday loan companies it is time we injected new energy into the credit union market across Britain.

“Many families are feeling the pinch but serving personnel and veterans face particular challenges and we owe them a better deal. My bill aims to provide us with the tools to achieve this ambition.”

The proposals are inspired by Navy Federal, the world’s largest Credit Union, which provides low-cost loans, mortgages and other financial products to American servicemen and their families.

Research by the Royal British Legion has found that around a third of veterans, including almost half of the recently injured, experience financial difficulties which lead many into high levels of debt.

Last year the charity’s Benefits and Money Advice Service helped 11,000 army personnel in its second year. This was an increase of 8,600 on its first year.

The Bill follows Ed Miliband’s recent announcement of plans to fund the expansion of credit unions by taxing payday lenders. The Co-operative Party is proposing that some of the money raised in the first year is used to provide seed-funding for the proposed military credit union.

Thomas added: “US soldiers, sailors and marines on active service duty can focus on the day job without worrying about their financial affairs at home. The British armed forces deserve the same support.”