New Allotment System Change Frequently Asked Questions

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New Allotment System Change Frequently Asked Questions

This policy change affords additional protection to all active duty service members.

The DoD Financial Management Regulation (DoD 7000.14-R, Volume 7A, Chapters 40 and 42)  is being amended to update the description of discretionary allotments to prohibit the use of allotments to purchase, lease or rent personal property.  

The update is effective January 1, 2015.

Changes to the DoD FMR would update the list of what kinds of allotments are ALLOWED, to include but not limited to, allotments for payments for or to, or deposits to: 

  • Savings accounts;
  • Support to dependents or other relatives, spouse or former spouse;
  • Relatives not legally designated a dependent;
  • Insurance premiums;
  • Mortgage or rent payments for real property;
  • The Air Force Enlisted Village (Air Force members only);
  • A financial institution, mutual fund company, or investment firm;
  • U.S. Savings Bonds (via TreasuryDirect account);
  • Debts owed for funds administered by the U.S. Government;
  • Charitable contributions to the Combined Federal Campaign; 
  • Military privatized housing payments.

Changes to the DoD FMR would update the list of the allotments that are PROHIBITED, including allotments to purchase or finance: 

  • Vehicles (e.g., automobiles, motorcycles, boats);
  • Appliances or household goods (e.g., washer, dryer, furniture);
  • Electronics (e.g., laptop, tablet, cell phone, television); or
  • Other consumer items that are tangible and movable.

Secretary of Defense Hagel directed a review of the allotment system following a major enforcement action by the Consumer Financial Protection Bureau in which a civilian company targeted servicemembers with abusive practices of the allotment system to charge exorbitant fees and interest rates for personal property loans.

Discretionary allotments virtually guarantee payment for purchases made by active duty military members and have been the target for some predatory sales and business practices. The new policy does not limit members’ use of alternative automated payment options available through their banks and credit unions that may offer increased visibility of their transactions affecting their financial stability.

The Secretary wanted to preserve the ease of use and the flexibility of the system for service members while eliminating the aspects most likely to be abused.  Ultimately, this change will significantly improve service member protections while not significantly reducing the flexibility to use allotments for a number of useful purposes.

The DoD Financial Management Regulation (DoD Instruction 7000.14-R, Volume 7A, Chapters 40 and 42) are currently being updated.  The regulation will be available on the DoD Comptroller’s website at http://comptroller.defense.gov/fmr.aspx. Once the update is complete, DFAS will make the information available on its website.

DFAS encourages military members to contact their servicing finance office or Personnel Support Detachment with any questions regarding allotments or other pay topics.