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                                August 31, 1999

Steven Giroux

Dear Steve:

         American Business Financial Services, Inc. (the "Company") considers it
essential to the best interests of its stockholders to attract top executives
and to foster the continuous employment of key management personnel. The Board
of Directors of the Company (the "Board") recognizes that the possibility of a
future change of control may exist and that such possibility, and the
uncertainty and questions which it may raise among management, may result in the
departure or distraction of management personnel to the detriment of the Company
and its stockholders.

         The Board has determined that appropriate steps should be taken to
ensure the continuity of management and to foster objectivity in the face of
potentially disturbing circumstances arising from the possibility of a change of
control of the Company, although no such change is now contemplated.

         In order to induce you to accept employment by the Company and in
consideration of your further services to the Company, the Company agrees that
you shall receive the severance benefits set forth in this letter agreement
("Agreement") in the event your employment with the Company terminates within
the twelve (12) month period immediately subsequent to a "Change of Control" of
the Company (as defined in subparagraph 2(c) hereof) under the circumstances
described below.

         1. Term of Agreement. This Agreement shall commence on the date hereof
and shall continue in effect until your employment with the Company is
terminated other than after a Change of Control unless sooner terminated by
written agreement of the Company and you.

         2. Definitions. As used in this Agreement:

         (a) "Annual Compensation" means the total of (i) one year of base
salary, at the highest base salary rate that you were paid by the Company in the
12-month period prior to the date of your termination of employment, and (ii)
100% of the greatest annual bonus which you were paid within the past three
fiscal years.

         (b) "Beneficial Owner" shall have the meaning ascribed to such term in
Rule l3d-3 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended (the "Exchange Act").



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         (c) "Change of Control" of the Company means and includes each and all
of the following occurrences:

            (i) The stockholders of the Company approve a merger or
     consolidation of the Company with any other corporation and such
     transaction is consummated, other than (A) a merger or consolidation which
     would result in the voting securities of the Company outstanding
     immediately prior thereto continuing to represent (either by remaining
     outstanding or by being converted into voting securities of the surviving
     entity) at least seventy-five percent (75%) of the total voting power
     represented by the voting securities of the Company (or such surviving
     entity outstanding immediately after such merger or consolidation) or (B) a
     merger or consolidation which would result in at least twenty percent (20%)
     of the voting securities of the Company (or such surviving entity
     outstanding immediately after such merger or consolidation) being held by
     an Employee Group.

            (ii) The stockholders of the Company approve a plan of complete
     liquidation of the Company or an agreement for the sale or disposition by
     the Company of all or substantially all the Company's assets, other than a
     transaction which result in an Employee Group holding, directly or
     indirectly, at least twenty percent (20%) of the assets upon completion of
     such transaction.

            (iii) The acquisition by any Person as Beneficial owner, directly or
     indirectly, of securities of the Company representing fifty percent (50%)
     or more of the total voting power represented by the Company's then
     outstanding voting securities except (A) if such Person constitutes an
     Employee Group, or (B) pursuant to a negotiated agreement with the Company
     pursuant to which such securities are purchased for the Company.

            (iv) A majority of the Board of Directors of the Company in office
     at the beginning of any twenty-four (24) month period is replaced during
     the course of such twenty-four (24) month period (other than by voluntary
     resignation of individual directors in the ordinary course of business) and
     such placement was not initiated by the Board of Directors of the Company
     as constituted at the beginning of such twenty-four (24) month period or an
     Employee Group.

         (d) "Change of Control Date" means the date upon which a Change of
Control transaction is consummated.

         (e) "COBRA" means Title X of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended.

         (f) "Code" means the Internal Revenue Code of 1986, as amended.

         (g) "Company" means American Business Financial Services, Inc., and any
successor as provided in Section 9 hereof.

         (h) "Employee Group" means one or more members of the then existing
management and/or employee groups of the Company acting alone or in a concerted
effort.

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         (i) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and as used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Sections 13(d) of the Exchange Act but
excluding the Company and any subsidiary and any employee benefit plan sponsored
or maintained by the Company or any subsidiary (including any trustee of such
plan acting as Trustee).

         (j) "Severance Payment" means the payment of severance compensation as
provided in Section 3 of this Agreement.

         3. Compensation Upon Termination of Employment Following a Change of
Control. If your employment with the Company is terminated within twelve (12)
months after a Change in Control, subject to the limitations set forth in
paragraph 3(d) below, (a "Covered Termination"),

         (a) You will be entitled to a Severance Payment in an amount computed
as follows:

            (i) an amount equal to one (1) times Annual Compensation multiplied
     by a fraction, the numerator of which is the result of 365 less the number
     of days elapsing since the Change of Control Date and the denominator of
     which is 365 ("Termination Payment"); plus

            (ii) continued coverage under the Company's health and group-term
     life insurance benefits on the same basis as such benefits were provided to
     you and your family under plans of the Company as of the Change of Control
     for a total of days which equals the result of 365 less the number of days
     elapsing since the Change of Control Date,

         (b) Any cash payment to you under subparagraph 3(a) shall be made
within 30 calendar days of your termination of employment.

         (c) Upon the occurrence of a Covered Termination, you shall be
provided, at the Company's sole expense, with professional outplacement services
consistent with your duties or profession and of a type and level customary for
persons in your position, as selected by the Company, subject to reasonable
limitations established by the Company on a uniform basis for similarly situated
employees as to duration and dollar amounts.

         (d) Notwithstanding anything contained in subsection (a) above, the
Company shall have no obligation to make any payment or offer any benefits to
you under this Section 3 if your employment is terminated (i) prior to a Change
in Control, (ii) or if your employment is terminated by the Company after a
Change in Control for Cause (as defined in Section 4), (iii) by reason of death
or Disability (as defined in Section 5), or (iv) due to retirement or
resignation other than for Good Reason (as defined in Section 6).

         (e) For purposes of COBRA, the date of a "qualifying event" for you and
your covered dependents shall be the date upon which the coverage provided under
Section 3(a)(ii) above terminates.

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         4. Cause. For purposes of this Agreement, "Cause" means your: (i)
willful gross neglect of your duties with the Company, (ii) fraud or dishonesty
in connection with performance of your duties to the Company (iii) conviction by
a court of competent jurisdiction of any crime (or upon entering a plea of
guilty or nolo contendere to a charge of any crime) constituting a felony or
(iv) failure to enter into any written employment agreement, with a minimum term
of two years, offered to you in good faith by the Company which would entitle
you to a position, responsibilities, compensation, benefits package, Severance
Payment and other terms and conditions of employment at least as favorable to
you as those to which you are entitled on the date hereof.

         5. Disability. For purposes of this Agreement, "Disability" means that,
at the time your employment is terminated, you have been unable to perform the
duties of your position for a period of three (3) consecutive months or for a
period in excess of six months within any twelve month period (whether or not
consecutive) as the result of your incapability due to physical or mental
illness.

         6. Good Reason. The Company will be obligated to make payments and
provide benefits under Section 3 if you terminate your employment for Good
Reason within twelve months after a Change in Control. For purposes of this
Agreement "Good Reason" means

            (i) a material reduction in salary or benefits,

            (ii) a material change in job responsibilities,

            (iii) a request to relocate, except for office relocations that
     would not increase your one-way commute by more than 50 miles, or

            (iv) the failure of the Company to obtain the assumption of the
     Agreement as stipulated in Section 9 hereof.

In no event shall you be considered to have terminated your employment for "Good
Reason" unless and until (i) the Company receives written notice from you
identifying in reasonable detail the acts or omissions constituting such "Good
Reason" and the provision of this Agreement you relied upon for such
termination, and (ii) such acts or omissions are not cured by the Company within
five (5) business days of the Company's receipt of such notice.

         7. Disputes. If you disagree with your allotment of benefits under this
Agreement, you may file a written appeal with the designated human resources
representative. Any claim relating to this Agreement shall be subject to this
appeal process. The written appeal must be filed within sixty (60) days of your
termination date.

         The appeal must state the reasons that you believe you are entitled to
different benefits under the Agreement. A designated human resources
representative shall review the claim. If the claim is wholly or partially
denied, the designated human resources representative shall provide you with a
written notice of the denial, specifying the reasons the claim was denied. Such
notice shall be provided within ninety (90) days of receiving your written
appeal.

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         If your appeal is denied, you shall have the right and option to elect
review of such denial by either a court of competent jurisdiction or by
arbitration.

         8. No Mitigation.

         (a) You shall not be required to mitigate the amount of any payment
provided for in Section 3 hereof by seeking other employment or otherwise, nor
shall the amount of such payment be reduced by reason of compensation or other
income you receive for services rendered after your termination of employment
with the Company.

         (b) In addition to the Termination Payment payable pursuant to Section
3 hereof, you shall be entitled to receive all benefits payable to you under any
benefit plan of the Company in which you participate.

         9. Company's Successors. The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company, to
expressly assume and agree to perform the obligations under this Agreement in
the same manner and to the same extent that the Company would be required to
perform if no such succession had taken place. As used in this Section 9,
"Company" includes any successor to its business or assets as aforesaid which
executes and delivers this Agreement or which otherwise becomes bound by all the
terms and provisions of this Agreement by operation of law.

         10. Notice. Notices and all other communications provided for in this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or five (5) days after deposit with postal authorities
transmitted by United States registered or certified mail, return receipt
requested, postage prepaid, addressed to the respective addresses set forth on
the first or last page of this Agreement, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notices of change address shall be effective only upon receipt.

         11. Amendment or Waiver. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing by you and the Company. No waiver of either party at any
time of the breach of, or lack of compliance with, any conditions or provisions
of this Agreement shall be deemed a waiver of the provisions or conditions
hereof.

         12. Sole Agreement. This Agreement represents the entire agreement
between you and the Company with respect to the matters set forth herein and
supersedes and replaces any prior agreements in their entirety. No agreements
or representations, oral or otherwise, express or implied, with respect to the
subject matter of this Agreement will be made by either party which are not set
forth expressly herein. Nothing herein guarantees you employment for any
specified period of time prior to a Change of Control.

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         13. Employee's Successors. This Agreement shall inure to the benefit of
and be enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
should die while any amounts are still payable to you hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of the Agreement to your devisee, legatee, or other designee or, if there
be no such designees, to your estate.

         14. Funding. This Agreement shall be funded from the Company's general
assets.

         15. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.

         16. Applicable Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the Commonwealth of Pennsylvania.

         17. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together will constitute
one and the same instrument.

         If the foregoing conforms with your understanding, please indicate your
agreement to the terms hereof by signing where indicated below and returning one
copy of this Agreement to the undersigned.

         IN WITNESS WHEREOF, this Agreement is executed effective as of the date
set forth above.

                                            Very truly yours,


                                            By: /s/ Jeffrey M. Ruben, EVP
                                                -------------------------------
                                                Jeffrey M. Ruben


ACCEPTED AND AGREED TO AS OF
THE DATE FIRST SET FORTH ABOVE:


/s/ Stephen M. Giroux
--------------------------------
[Name]

10 Fawnwood Drive
Voorhees, New Jersey 08043
--------------------------------
(Address)




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