New DoD Policy on Allotments

  • Published
  • 14th Comptroller Squadron
COLUMBUS AIR FORCE BASE, Miss. --  Statement on Allotment Policy Change
In June 2013, Secretary of Defense Chuck Hagel directed the Comptroller to form an interagency team in response to a major enforcement action by the Consumer Financial Protection Bureau. The team assessed changes in our military allotment system to prevent unscrupulous businesses from taking advantage of service members.

Getting service members to buy things they may not be able to afford is attractive to unscrupulous companies because payments made by allotment are virtually guaranteed. The Secretary of Defense approved changes to the allotment system on Sept. 29, 2014, that were recommended by the Undersecretary of Defense (Comptroller) following collaboration with an interagency team.

The Department of Defense Financial Management Regulation will be amended to prohibit the use of allotments to purchase, lease or rent personal property. The effective date for this change is Jan. 1, 2015. 

The policy change prohibits starting new allotments to purchase, lease, or rent personal property.  Existing allotments are not affected. It does not prohibit allotments made to: savings accounts, support for dependents, insurance premiums, mortgage or rent payments or investments. This policy change does not apply to military retirees or DOD civilians.

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 by commercial lenders. Ultimately, this change will significantly improve service member protections while not significantly reducing the flexibility to use allotments for a number of useful purposes. This policy change affords additional protection to all active duty service members and their families.

Q&A:

Q1. What type of allotments will be prohibited by the policy change? What types of allotments are allowed currently?
A1.  The DOD FMR will list the allotments that are prohibited, to include but not limited to, allotments for payments for or to, or deposits to:
· Vehicles (e.g., automobiles, motorcycles, boats);
· Appliances or household goods (e.g., washer, dryer, furniture);
· Electronics (e.g., laptop, iPad, cell phone, television); or
· Other consumer items that are tangible and movable.

Allotments that remain authorized for service members include payments to dependents and relatives, payment of premiums for insurance, repayment of indebtedness to the U.S. Government, mortgages, and savings account deposits (for other than prohibited purposes described above) and for Combined Federal Campaign charitable contributions. 

Q2.  When will the change go into effect?
A2.  The update is effective Jan. 1, 2015.

Q3.  Will Congress need to approve the changes?
A3.  No. This is a change to a DOD regulation. The Secretary has the authority to make these changes to the allotment system through changes to the DOD Financial Management Regulation (DoD 7000.14-R, Volume 7A, Chapters 40 and 42). No action by Congress is required. However, notification will be made to members who have expressed interest in the allotment abuses. 

Q4. Who made up the "interagency team?"
A4. The interagency team consisted of DOD representatives from the USD (Comptroller), Defense Finance and Accounting Service (DFAS), USD (Personnel and Readiness), and General Counsel offices within the Office of the Secretary of Defense, along with the Joint Staff. Non-DOD participants included representatives from the Federal Deposit Insurance Corporation (FDIC), the Consumer Financial and Protection Bureau (CFPB), the Federal Reserve Board (FRB), the Office of the Comptroller of the Currency (OCC), and the National Credit Union Administration (NCUA).