Many Paycheck Allotments Going Away

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If you are the type of military person who likes to use to paycheck allotments to pay for items like furniture or cars military financial life is about to get a little more annoying.

The Defense Department announced late last week that, starting Jan. 1, they will no longer be allowing troops to set up new allotments for personal property like electronics or vehicles or home goods. Allotments that you currently have for that stuff are safe — nothing new will be permitted.

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You can still use the system for new allotments for mortgage or rent payments, child support, investments, charity contributions and repaying the government for equipment they claim your spouse lost (don’t even get me started on that).

You can read all about the nitty-gritty behind this decision over in my Military.com story. 

Officials say they are getting rid of the allotments as a way of curbing abuse by predatory lenders. A investigation earlier this year in the Washington Post famously identified USA Discounters, which has recently changed its name to USA Living, as a prime example of this kind of abuse.

If you live near a military base you have probably at least seen this store or other “rent to own” stores like it. With marketing targeted at troops and their families, the store sells items under a payment plan with astronomical interest rates. For example, the Washington Post story found, a laptop that typically sold $650 other places for  could easily sell for $2,993 after interest and add-ons pushed by the company.

The real trouble comes when the service member halts payment, especially if they live overseas. The company sues in Virginia those who fall behind in payments. The service member does not have to be present for the judgement to go forward, and, in the case of the laptop above, the person who bought it ended up owing $8,626 after the ruling was passed, the story reported.

One of the gimmicks stores like USA Living use to hook troops into buying items regardless of whether or not they can actually afford them, is to set-up payment through paycheck allotment. This guarantees that the creditor gets paid before the money even hits the bank account of the person who bought the item and makes purchasing these things very easy and attractive seeming.

The new DoD rule stops stores like USA Living from using that type of gimmick to get troops into its store.

 Our friend Kate over at Paycheck Chronicles hates this change.  She says rules like this one take away the personal responsibility of troops to make smart financial decisions. Why not let service members decide for themselves what they can afford and can’t afford? It’s their paycheck. They should be able to handle it. And if they can’t they need to learn from their own mistakes, not be protected by government regulations from making them.

I’m usually with Kate on this personal responsibility stuff, but I don’t know about this one. When rules are designed to make military members a special class of citizens with special financial protections, I tend to vote “no” (… if I actually had a vote. Which I do not). But this?

This seems like a good idea. And here’s why: I am unaware of paycheck allotments being an option for civilians employed by any non-government entity. Being paid by allotment is simply not an option, as far as I know, for companies selling items to those people. So why should it be an option for companies selling items on credit to military personnel? In my view this does not create a special citizen class. Instead, it levels the playing field.

What do you think? Tell us in the comments.

Editor’s note: While I think it’s pretty clear that much of the above is commentary or was shown as part of the Washington Post investigation which I clearly referenced (and never included a statement that they require allotments) representatives of USA Living disagreed. They sent us this note:

“USA Discounters never required allotments, unlike competitors, and has never been accused of any abuse related to the use of allotments.  It is irresponsible to report that the voluntary use of allotments – meaning it is the customer’s choice – is somehow a ‘gimmick.’

It is also wrong to report that the company uses allotments to ‘hook troops into buying items regardless of whether or not they can actually afford them.’ In fact, the company’s underwriting process is very detailed and, unlike competitors, focuses primarily on the customer’s ability to pay the obligation, with the credit score most weighted factor.  Moreover, the company goes well beyond what is required under the SCRA and has long-standing initiatives and standards that set it apart from others with respect to credit practices.”

About the Author

Amy Bushatz
Amy is the editor in chief of Military.com’s spouse and family blog SpouseBuzz.com. A journalist by trade, Amy also covers spouse and family news for Military.com where she is the managing editor of spouse and family content. An Army wife and mother of two, Amy has been featured as a subject matter expert on CNN.com, NPR, Fox News, NBC, CBS, ABC and BBC as well as in the New York Times, Wall Street Journal and Washington Post. Follow her on twitter @amybushatz.
  • Ambthomas

    Its a catch 22 imo. Its a good thing to be able to set up but not when it is used by predatory lenders. It helps the service member still make payments should they deploy but I do agree that it should not be used when it comes to people taking advantage. I wish I could set up allotments to just come right out of my personal paycheck to pay for stuff so that it is already paid before I even get paid. It would make it easier for me. Never dealt with allotments before but instead of being crossed out it shoukd be set up for use on base only from the Nex/PX only.

  • Wayne

    It just furthers the view that troops can’t handle their finances. True some can’t, but the vast majority do handle money just fine.

    Personally i always went to my bank to set up allotments.

  • Cas

    Care to do a piece on stateside exchanges (and thus, some concessionaires) that are open for the Thanksgiving holiday? I find it incredibly tasteless to have spouses who have limited holidays with their service members working when they should be with family. I volunteered to work instead of my coworkers (who have children), but I’m furious at the thought of leaving my husband alone at home on the couch.

  • guest

    I’m sad about this change, because it was an awesome feature and benefit. Many of the places we have lived took rent and utilities on allotment, which meant that even if both of us were away from home working, the bills took care of themselves. While we are using USAA’s bill pay for this, we have to check it every few months because the system screws up the dates items get paid and it’s very frustrating when you have little internet access to try and track all of that down. For us, it was never about predatory practices and was always about 1 less thing to worry about.

    • Amy_Bushatz

      Guest — the rent/utilities allotments are safe. This only apples to personal property.

  • Tracy

    One great thing about allotments are they get paid. Even if military member has a dreaded no pay due. Also helps those with spouses that forget to pay the bills.

  • anonc

    I just set up my bills to be automatically paid by my bank on the 1st or 15th of every month. We’ve never used an allotment.

  • Leslie

    Why are judges allowing judgements against deployed soldiers? Isn’t that against the law? Sounds like there may be judges getting kickbacks for getting these judgements.

  • bernie

    I remember a time, where as a junior enlisted, not making a lot of money, the guarantee of an allotment was the only way vendors would take the risk. I don’t know if that’s still the case.

    Now as mentioned above, we now have the capability of using a bill-paying option from our own bank to automatically pay bills.

    closing the door on the rapacious practices of lendors has been impossible to legislate out of existance, so it seems that doing away with the allotment is the only way left. But I’m sure that, as with all simplistic plans, regardless of how well-intentioned, there will still be negative ramifications

  • Ken Bird

    I would like to say there are a lot of business that depend upon military paychecks to survive, these establishments usually are near military bases. I agree doing away from having allotments deducted from your military paycheck unless its a military medical or money owed to the government. The allotment should be taken from the bank where the military check is deposited. A civilian transaction should be dealt with a civilian bank account.

  • Guest

    What is an allotment? Except for the way to pay for things before they had Bill Pay through the bank?