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                  AMERICAN BUSINESS FINANCIAL SERVICES, INC.

                 1997 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

     1. Purpose of Plan

     The purpose of this 1997 Non Employee Director Stock Option Plan (the
"Plan") is to provide additional incentive to non-employee directors of
American Business Financial Services, Inc., a Delaware Corporation (the
"Company") by encouraging them to invest in shares of the Company's common
stock, $0.001 par value per share ("Common Stock"), and thereby acquire a
proprietary interest in the Company and an increased personal interest in the
Company's continued success and progress.

     2. Aggregate Number of Shares

     120,000 shares of the Company's Common Stock shall be the aggregate
number of shares which may be issued under this Plan. Notwithstanding the
foregoing, in the event of any change in the outstanding shares of the Common
Stock of the Company by reason of a stock dividend, stock split, combination
of shares, recapitalization, merger, consolidation, transfer of assets,
reorganization, conversion or what the Committee (defined in Section 4(a)),
deems in its sole discretion to be similar circumstances, the aggregate number
and kind of shares which may be issued under this Plan shall be appropriately
adjusted in a manner determined in the sole discretion of the Committee.
Reacquired shares of the Company's Common Stock, as well as unissued shares,
may be used for the purpose of this Plan. Common Stock of the Company subject
to options which have terminated unexercised, either in whole or in part,
shall be available for future options granted under this Plan.

     3. Class of Persons Eligible to Receive Options

     All directors of the Company who are not full-time employees of the
Company or its subsidiaries are eligible to receive an option or options under
this Plan and shall receive awards under the Plan as provided in Section 6
hereof. No individual may receive options under this Plan for more than the
total number of shares of the Company's Common Stock authorized for issuance
under this Plan.

     4. Administration of Plan

     (a) This Plan shall be administered either by the Company's Board of
Directors or an option committee appointed by the Company's Board of
Directors. The committee appointed to administer the Plan, if any, shall
consist of a minimum of two and a maximum of five members of the Board of
Directors, each of whom shall be a "disinterested person" within the meaning
of Rule 16b-3(c)(2)(i) under the Securities Exchange Act of 1934, as amended,
or any future corresponding rule. The term "Committee," as used herein, shall
refer to either the Company's Board of Directors or such option committee,
depending upon who is administering the Plan.


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          (b) The Committee shall adopt such rules for the conduct of its
business and administration of this Plan as it considers desirable. A majority
of the members of the Committee shall constitute a quorum for all purposes.
The vote or written consent of a majority of the members of the Committee on a
particular matter shall constitute the act of the Committee on such matter.
The Committee shall have the right to construe the Plan and the options issued
pursuant to it, to correct defects and omissions and to reconcile
inconsistencies to the extent necessary to effectuate the Plan and the options
issued pursuant to it, and such action shall be final, binding and conclusive
upon all parties concerned. No member of the Committee or the Board of
Directors shall be liable for any act or omission (whether or not negligent)
taken or omitted in good faith, or for the exercise of an authority or
discretion granted in connection with the Plan to a Committee or the Board of
Directors, or for the acts or omissions of any other members of a Committee or
the Board of Directors. Subject to the numerical limitations on Committee
membership set forth in Section 4(a) hereof, the Board of Directors may at any
time appoint additional members of the Committee and may at any time remove
any member of the Committee with or without cause. Vacancies in the Committee,
however caused, may be filled by the Board of Directors, if it so desires.

     5. Non-Qualified Stock Options

          (a) Options issued pursuant to this Plan shall be non-qualified
stock options. The option price for options issued under this Plan shall be
equal to the fair market value (as defined below) of the Company's Common
Stock on the date of the grant of the option. The fair market value of the
Company's Common Stock on any particular date shall mean the last reported
sale price of a share of the Company's Common Stock on any stock exchange on
which such stock is then listed or admitted to trading, or on the NASDAQ
National Market System or NASDAQ Small Cap, on such date, or if no sale took
place on such day, the last such date on which a sale took place, or if the
Common Stock is not then quoted on the NASDAQ National Market System or NASDAQ
Small Cap, or listed or admitted to trading on any stock exchange, the average
of the bid and asked prices in the over-the-counter market on such date, or if
none of the foregoing, a price determined in good faith by the Committee to
equal the fair market value per share of the Common Stock.

         (b) Subject to the authority of the Committee set forth in Section
4(a) hereof, Non-Qualified Stock Options issued to directors pursuant to this
Plan shall be issued substantially in the form set forth in Appendix I hereof,
which form is hereby incorporated by reference and made a part hereof, and
shall contain substantially the terms and conditions set forth therein.
Non-Qualified Stock Options shall expire ten years after the date they are
granted, unless terminated earlier under the option terms. At the time of
granting a Non-Qualified Stock Option hereunder, the Committee may, in its
discretion, amend or supplement any of the option terms contained in 
Appendix I.

         (c) Neither the Company nor any of its current or future parent,
subsidiaries or affiliates, nor their officers, directors, shareholders, stock
option plan committees, employees or agents shall have any liability to any
optionee in the event of any adverse tax consequences resulting from the grant
of an option.

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     6.   Awards Under the Plan

         On October 1st of each year, each director of the Company who is not
an employee of the Company shall be automatically granted, without any further
action on the part of the Committee, an option to purchase 5,000 shares of
Common Stock, subject to availability of shares in the Plan to fund such
awards to all non-employee directors at the time of grant. Any option granted
pursuant to this Plan shall vest in full on the date of grant and shall be
exercisable over a three-year period provided that the optionee remains a
director of the Company. Notwithstanding the foregoing, no awards shall be
made pursuant to such Plan unless approved by the Board of Directors prior to
the automatic grant date.

     7.   Amendment, Supplement, Suspension and Termination

         The Board of Directors reserves the right at any time, and from time
to time, to amend or supplement this Plan in any way, or to suspend or
terminate it, effective as of such date, which date may be either before or
after the taking of such action, as may be specified by the Board of
Directors; provided, however, that such action shall not affect options
granted under the Plan prior to the actual date on which such action occurred.
If the Board of Directors voluntarily submits a proposed amendment,
supplement, suspension or termination for shareholder approval, such
submission shall not require any future amendments, supplements, suspensions
or terminations (whether or not relating to the same provision or subject
matter) to be similarly submitted for shareholder approval.

     8.   Effectiveness of Plan

         This Plan shall become effective on the date of its adoption by the
Company's Board of Directors, subject however to approval by the holders of
the Company's Common Stock. Options may be granted under this Plan prior to
obtaining shareholder approval, provided such options shall not be exercisable
until shareholder approval is obtained.

     9.   General Conditions

         (a) Nothing contained in this Plan or any option granted pursuant to
this Plan shall confer upon any director the right to continue as a director
of the Company or any affiliated or subsidiary corporation or interfere in any
way with the rights of the Company or any affiliated or subsidiary
corporation, or their respective shareholders, to terminate the directorship
of any such director.

         (b) Corporate action constituting an offer of stock for sale to any
person under the terms of the options to be granted hereunder shall be deemed
complete as of the date when the Committee authorizes the grant of the option
to the such person, regardless of when the option is actually delivered to
such person or acknowledged or agreed to by him.



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         (c) The terms "parent corporation" and "subsidiary corporation" as
used throughout this Plan, and the options granted pursuant to this Plan,
shall (except as otherwise provided in the option form) have the meaning that
is ascribed to that term when contained in Section 422(b) of the Code and the
regulations thereunder, and the Company shall be deemed to be the grantor
corporation for purposes of applying such meaning.

         (d) References in this Plan to the Code shall be deemed to also refer
to the corresponding provisions of any future United States revenue law.

         (e) The use of the masculine pronoun shall include the feminine
gender whenever appropriate.

     10.  Duration of the Plan

         The Plan shall remain in effect until all awards under the Plan have
been satisfied by the issuance of shares, provided that options shall not be
granted pursuant to this Plan after the expiration of three years from the
date the Plan is adopted by the Board of Directors of the Company.


Adopted September 30, 1997
by the Board of Directors of
American Business Financial Services, Inc.



                                   /s/Anthony J. Santilli, Jr.
                                   ---------------------------------------
                                   Anthony J. Santilli, Jr., President


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                                  APPENDIX I

             NON-QUALIFIED STOCK OPTION FOR NON-EMPLOYEE DIRECTORS


To: _______________________________
               Name

    _______________________________
              Address

Date of Grant: ____________________


     You are hereby granted an option, effective as of the date hereof, to
purchase ______ shares of common stock, $0.001 par value per share ("Common
Stock"), of American Business Financial Services, Inc., a Delaware corporation
(the "Company") at a price of $ per share pursuant to the Company's 1997
Non-Employee Director Stock Option Plan (the "Plan").

     Your option shall be exercisable in full on the date of grant and shall
remain exercisable for a period of three years, except if terminated earlier
as provided herein. This option shall not be exercisable after three years
from the date of its grant (the "Scheduled Termination Date"). During the
period during which this option is exercisable, the number of shares subject
to such option and the exercise price per share shall be adjusted for any
change in the outstanding shares of the Common Stock of the Company by reason
of a stock dividend, stock split, combination of shares, recapitalization,
merger, consolidation, transfer of assets, reorganization, conversion or what
the Committee deems in its sole discretion to be similar circumstances.

     You may exercise your option by giving written notice to the Secretary of
the Company on forms supplied by the Company at its then principal executive
office, accompanied by payment of the option price for the total number of
shares you specify that you wish to purchase. The payment may be in any of the
following forms: (a) cash, which may be evidenced by a check and includes cash
received from a stock brokerage firm in a so-called "cashless exercise"; (b)
(unless prohibited by the Committee) certificates representing shares of
Common Stock of the Company, which will be valued by the Secretary of the
Company at the fair market value per share of the Company's Common Stock (as
determined in accordance with the Plan) on the date of delivery of such
certificates to the Company, accompanied by an assignment of the stock to the
Company; or (c) (unless prohibited by the Committee) any combination of cash
and Common Stock of the Company valued as provided in clause (b). Any
assignment of stock shall be in a form and substance satisfactory to the
Secretary of the Company, including guarantees of signature(s) and payment of
all transfer taxes if the Secretary deems such guarantees necessary or
desirable.

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     Your option will, to the extent not previously exercised by you,
terminate three months after the date on which you cease for any reason to be
a director of the Company (whether by death, disability, resignation, removal,
failure to be reappointed, reelected or otherwise and regardless of whether
the failure to continue as a director was for cause or without cause or
otherwise), but in no event later than three years from the date this option
is granted. After the date you cease to be a director, you may exercise this
option only for the number of shares which you had a right to purchase and did
not purchase on the date you ceased to be a director. Your directorship shall
not be deemed to have terminated if you cease being a director of the Company
but are or concurrently therewith become a director of the Company or another
subsidiary corporation.

     In the event of any change in the outstanding shares of the Common Stock
of the Company by reason of a stock dividend, stock split, combination of
shares, recapitalization, merger, consolidation, transfer of assets,
reorganization, conversion or what the Committee deems in its sole discretion
to be similar circumstances, the number and kind of shares subject to this
option and the option price of such shares shall be appropriately adjusted in
a manner to be determined in the sole discretion of the Committee.

     This option is not transferable otherwise than by will or the laws of
descent and distribution, and is exercisable during your lifetime only by you,
including, for this purpose, your legal guardian or custodian in the event of
disability. Until the option price has been paid in full pursuant to due
exercise of this option and the purchased shares are delivered to you, you do
not have any rights as a shareholder of the Company. The Company reserves the
right not to deliver to you the shares purchased by virtue of the exercise of
this option during any period of time in which the Company deems, in its sole
discretion, that such delivery would violate a federal, state, local or
securities exchange rule, regulation or law.

     Notwithstanding anything to the contrary contained herein, this option is
not exercisable until all the following events occur and during the following
periods of time:

         (a) Until the Plan pursuant to which this option is granted is
approved by the shareholders of the Company in the manner prescribed by the
Code and the regulations thereunder;

         (b) Until this option and the optioned shares are approved and/or
registered with such federal, state and local regulatory bodies or agencies
and securities exchanges as the Company may deem necessary or desirable; or

         (c) During any period of time in which the Company deems that the
exercisability of this option, the offer to sell the shares optioned
hereunder, or the sale thereof, may violate a federal, state, local or
securities exchange rule, regulation or law, or may cause the Company to be
legally obligated to issue or sell more shares than the Company is legally
entitled to issue or sell.

         (d) Until you have paid or made suitable arrangements to pay (which
may include payment through the surrender of Common Stock, unless prohibited
by the Committee) (i) all 



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federal, state and local income tax withholding required to be withheld by the
Company in connection with the option exercise and (ii) the employee's portion
of other federal, state and local payroll and other taxes due in connection
with the option exercise.

          The following two paragraphs shall be applicable if, on the date of
exercise of this option, the Common Stock to be purchased pursuant to such
exercise has not been registered under the Securities Act of 1933, as amended,
and under applicable state securities laws, and shall continue to be
applicable for so long as such registration has not occurred:

          (a) The optionee hereby agrees, warrants and represents that he will
acquire the Common Stock to be issued hereunder for his own account for
investment purposes only, and not with a view to, or in connection with, any
resale or other distribution of any of such shares, except as hereafter
permitted. The optionee further agrees that he will not at any time make any
offer, sale, transfer, pledge or other disposition of such Common Stock to be
issued hereunder without an effective registration statement under the
Securities Act of 1933, as amended, and under any applicable state securities
laws or an opinion of counsel acceptable to the Company to the effect that the
proposed transaction will be exempt from such registration. The optionee shall
execute such instruments or representations, as counsel to the Company deems
advisable to avoid any violation of federal, state, local or securities
exchange rule, regulation or law.

          (b) The certificates for Common Stock to be issued to the optionee
hereunder shall bear the following legend:

         "The shares represented by this certificate have not been registered
     under the Securities Act of 1933, as amended, or under applicable state
     securities laws. The shares have been acquired for investment and may not
     be offered, sold, transferred, pledged or otherwise disposed of without
     an effective registration statement under the Securities Act of 1933, as
     amended, and under any applicable state securities laws or an opinion of
     counsel acceptable to the Company that the proposed transaction will be
     exempt from such registration."

The foregoing legend shall be removed upon registration of the legended shares
under the Securities Act of 1933, as amended, and under any applicable state
laws or upon receipt of any opinion of counsel acceptable to the Company that
said registration is no longer required.

     The sole purpose of the agreements, warranties, representations and
legend set forth in the two immediately preceding paragraphs is to prevent
violations of the Securities Act of 1933, as amended, and any applicable state
securities laws.

     It is the intention of the Company and you that this option shall not be
an "Incentive Stock Option" as that term is used in Section 422 of the Code
and the regulations thereunder.



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     Any dispute or disagreement between you and the Company with respect to
any portion of this option or its validity, construction, meaning, performance
or your rights hereunder shall be settled by arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration Association or
its successor, as amended from time to time. However, prior to submission to
arbitration you will attempt to resolve any disputes or disagreements with the
Company over this option amicably and informally, in good faith, for a period
not to exceed two weeks. Thereafter, the dispute or disagreement will be
submitted to arbitration. At any time prior to a decision from the
arbitrator(s) being rendered, you and the Company may resolve the dispute by
settlement. You and the Company shall equally share the costs charged by the
American Arbitration Association or its successor, but you and the Company
shall otherwise be solely responsible for your own respective counsel fees and
expenses. The decision of the arbitrator(s) shall be made in writing, setting
forth the award, the reasons for the decision and award and shall be binding
and conclusive on you and the Company. Further, neither you nor the Company
shall appeal any such award. Judgment of a court of competent jurisdiction may
be entered upon the award and may be enforced as such in accordance with the
provisions of the award.

     This option shall be subject to the terms of the Plan in effect on the
date this option is granted, which terms are hereby incorporated herein by
reference and made a part hereof. In the event of any conflict between the
terms of this option and the terms of the Plan in effect on the date of this
option, the terms of the Plan shall govern. This option constitutes the entire
understanding between the Company and you with respect to the subject matter
hereof and no amendment, supplement or waiver of this option, in whole or in
part, shall be binding upon the Company unless in writing and signed by the
President of the Company. This option and the performances of the parties
hereunder shall be construed in accordance with and governed by the laws of
the State of Delaware.

     Please sign the copy of this option and return it to the Company's
Secretary, thereby indicating your understanding of and agreement with its
terms and conditions.

                              AMERICAN BUSINESS FINANCIAL
                                 SERVICES, INC.



                              By: _________________________________

     I hereby acknowledge receipt of a copy of the foregoing stock option and,
having read it hereby signify my understanding of, and my agreement with, its
terms and conditions.


________________________________            __________________________________
(Signature)                                  (Date)