[Federal Register Volume 64, Number 174 (Thursday, September 9, 1999)]
[Rules and Regulations]
[Pages 48933-48938]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-23410]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 64, No. 174 / Thursday, September 9, 1999 /
Rules and Regulations
[[Page 48933]]
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DEPARTMENT OF AGRICULTURE
Food and Nutrition Service
7 CFR Parts 272, 273 and 274
[Amdt. No. 378]
RIN 0584-AC61
Food Stamp Program: Electronic Benefit Transfer Benefit
Adjustments
AGENCY: Food and Nutrition Service, USDA.
ACTION: Interim rule.
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SUMMARY: This action provides interim rulemaking for a proposed rule
published on May 19, 1998. It revises Food Stamp Program regulations
pertaining to the State agency's ability to make an adjustment to a
household's account in an Electronic Benefit Transfer (EBT) system. The
changes enable State agencies to make an adjustment to correct system
errors without sending an advance notice as currently required. This
rule also revises the formula for recovering funds under the re-
presentation rule.
The Department received a large number of comments to the proposed
rule, many of which suggested substantive changes. At least two
significant changes to the proposed rule have been incorporated as a
result of the comments received. Therefore, the Department has decided
to allow further comment by publishing an interim final rule. All
comments received will be analyzed, and any appropriate changes in the
rule will be incorporated into the subsequent publication of a final
rule.
DATES: This interim rule is effective October 12, 1999. State agencies
must implement the rule no later than March 7, 2000. Comments must be
received on or before November 8, 1999.
ADDRESSES: Comments should be submitted to Jeffrey N. Cohen, Chief,
Electronic Benefit Transfer Branch, Benefit Redemption Division, Food
and Nutrition Service, USDA, 3101 Park Center Drive, Alexandria,
Virginia, 22302. Comments may also be faxed to the attention of Mr.
Cohen at (703) 605-0232, or by e-mail to jeff.cohen@fns.usda.gov.
Written comments will be open for public inspection at the office of
the Food and Nutrition Service during regular business hours (8:30 a.m.
to 5 p.m., Monday through Friday) at 3101 Park Center Drive,
Alexandria, Virginia, Room 718.
FOR FURTHER INFORMATION CONTACT: Questions regarding this rulemaking
should be addressed to Mr. Cohen at the above addresses or by telephone
at (703) 305-2517.
SUPPLEMENTARY INFORMATION:
Interim Rule
Because this rule has significant changes from the proposed rule,
the Department is soliciting further public comment for 60 days. All
comments received will be analyzed, and any appropriate changes in the
rule will be incorporated in the subsequent publication of a final
rule.
Executive Order 12866
This interim final rule has been determined to be non-significant
for purposes of Executive Order 12866 and therefore was not reviewed by
the Office of Management and Budget.
Public Law 104-4
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub.
L. 104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. Under section 202 of the UMRA, the
Food and Nutrition Service generally must prepare a written statement,
including a cost-benefit analysis, for proposed and final rules with
``Federal mandates'' that may result in expenditures to State, local or
tribal governments, in the aggregate, or to the private sector, of $100
million or more in any one year. When such a statement is needed for a
rule, Section 205 of the UMRA generally requires the Food and Nutrition
Service to identify and consider a reasonable number of regulatory
alternatives and adopt the least costly, more cost-effective or least
burdensome alternative that achieves the objectives of the rule.
This interim final rule contains no Federal mandates (under the
regulatory provisions of Title II of UMRA) for State, local and tribal
governments or the private sector of $100 million or more in any one
year. Thus, this rule is not subject to the requirements of sections
202 and 205 of the UMRA.
Executive Order 12372
The Food Stamp Program is listed in the Catalog of Federal Domestic
Assistance under No. 10.551. For the reasons set forth in the final
rule in 7 CFR 3015, Subpart V and related Notice (48 FR 29115), this
Program is excluded from the scope of Executive Order 12372 which
requires intergovernmental consultation with State and local officials.
Regulatory Flexibility Act
This rule has been reviewed with regard to the requirements of the
Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612). Samuel Chambers,
Jr., Administrator, Food and Nutrition Service, has certified that this
final rule will not have a significant economic impact on a substantial
number of small entities. State and local welfare agencies will be the
most affected to the extent that they administer the Program.
Paperwork Reduction Act
This rule does not contain reporting or recordkeeping requirements
subject to approval by the Office of Management and Budget (OMB) under
the Paperwork Reduction Act of 1980 (44 U.S.C. 3507).
Executive Order 12988
This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. This rule is intended to have preemptive effect with
respect to any State or local laws, regulations or policies which
conflict with its provisions or which would otherwise impede its full
implementation. This rule is not intended to have retroactive effect
unless so specified in the ``Dates'' paragraph of this preamble. Prior
to any judicial challenge to the provisions of this rule or the
application of its provisions, all applicable administrative procedures
must be exhausted. In the Food Stamp Program, the administrative
procedures are as follows: (1) for Program benefit recipients--State
[[Page 48934]]
administrative procedures issued pursuant to 7 U.S.C. 2020(e)(1) and 7
CFR 273.15; (2) for State agencies--administrative procedures issued
pursuant to 7 U.S.C. 2023 set out at 7 CFR 276.7 for rules related to
non-quality control (QC) liabilities or 7 CFR Part 283 for rules
related to QC liabilities; (3) for Program retailers and wholesalers--
administrative procedures issued pursuant to 7 U.S.C. 2023 set out at 7
CFR 278.8.
Background
Proposed regulations were published in the Federal Register on May
19, 1998 at 63 FR 27511 to change the way in which certain EBT error
conditions are handled. The change was proposed following concerns from
the EBT community that current regulations do not allow State agencies,
or their processors, to make an adjustment to correct certain system
errors in a manner consistent with the commercial environment. During
normal EBT transaction processing, settlement is completed when the
transaction acquirer has been properly credited for an amount equal to
the amount debited from the household's benefit allotment. System
malfunctions, however, can cause an interruption to this process,
resulting in a settlement condition that does not reflect the original
transaction. The regulations proposed to allow State agencies to make
adjustments for these errors when concurrent notice was sent to the
household as opposed to the advance notice required by current
regulations. Changes were also proposed for handling re-presentations.
Readers are referred to the proposed regulation for a more complete
understanding of this final action.
Comments on the proposal were solicited through July 20, 1998. This
final action takes those comments received into account. Twenty-eight
comment letters were received in response to the proposed rule.
Individual comments were received from eighteen State agencies. (An
additional 10 State agencies commented as part of joint consortia
letters.) Of the remaining letters, 4 were from retailers and/or their
associations, 2 from EBT processors, 3 were from Public Interest
Groups, and 1 was from an alliance of States, networks, financial
institutions and retailers. Although four of the letters were received
late, their comments were considered. None of these four, however,
raised comments resulting in changes to the proposed rule that were not
raised by other commenters.
In general, the commenters supported the Department's efforts to
streamline the adjustment process for certain types of system errors.
The overwhelming majority of the commenters, however, believed that the
Department did not go far enough in doing so and that the EBT
adjustment policy should mirror commercial practice. The major comments
deemed by the Department to be significant are discussed below.
General
There is a significant difference between how EBT adjustments would
be handled under the proposed rules and how they are handled in the
commercial environment. While commercial adjustments are handled by
processors as routine corrections not requiring special notification to
customers, in the Food Stamp Program, when adjustments are a debit
against the household's account, they are viewed as a type of adverse
action. A majority of commenters believed that the food stamp
adjustment policy should strictly follow commercial or Electronic Funds
Transfer (EFT) standards, arguing that Congress expressly recognized
the importance of conforming EBT programs to commercial standards by
directing that ``an electronic benefit transfer system should take into
account generally accepted standard operating rules based on commercial
electronic technology'' (7 U.S.C. 2016 (i)(1)(D)).
The Department is aware that Congress wanted programs to ``take
into account'' commercial practices; however, by not mandating that EBT
follow commercial practices, Congress recognized that EBT differs from
EFT and, in some circumstances, must adhere to different standards.
Certainly, in the Personal Responsibility and Work Opportunity
Reconciliation Act of 1996, Pub. L. 104-193, (PRWORA), a precedent for
such a divergence was set when EBT was explicitly exempted from
Regulation E, a requirement for commercial EFT.
The Department believes that, while the overall procedural
framework for handling adjustments in the commercial environment is
acceptable, there are certain areas--i.e., notifications and the rights
to appeal--that must adhere to the requirements set forth in the Food
Stamp Act of 1977, as amended, 7 U.S.C. Sec. 2011-2036, (FSA), and food
stamp regulations. This is especially important in light of the fact
that the commercial environment is silent in some of these areas, or
the commercial standards in place are not appropriate for those who
depend upon food stamp benefits for basic subsistence.
Several commenters wanted the rule to clarify that State agencies
have final authority and reversal authority on all adjustments. They
also wanted the rule to require EBT processors to give State agencies
adjustment information upon request. The Department believes that Food
Stamp regulations already require processors to provide such
information by mandating at 7 CFR Sec. 274.12(j)(1)(vi) that systems
maintain an audit trail documenting the full cycle of issuance
``through settlement of retailer credits'' and by requiring at 7 CFR
Sec. 274.12(j)(2) that the system provide appropriate management
reports. As for final authority over adjustments, the Department
believes that EBT regulations, and contracts between State agencies and
their processors, give States final authority over all matters
pertaining to household accounts.
One commenter believed that the proposed rule implied that all
adjustments take place at the State level, when, in fact, they are
usually handled by the processors. The proposed rule was not meant to
imply that the State agencies handle adjustments. All EBT regulations
are addressed to the States, as they have authority over the
administration of the Food Stamp Program. As with other operational
components of EBT, any of the requirements of this rule can be handled
by processors, as agents of the State agencies, if appropriate. State
agencies remain ultimately responsible, however, for the actions of
their contractors.
One commenter suggested that adjustments should be handled as any
other administrative claim. The Department believes that adjustments
are different from claims in that the errors do not result in money
owed to FNS. All of the processing and reporting of claims are based on
a collection against an incorrect benefit issuance being passed back to
the government. Collection for adjustments, on the other hand, do not
result in savings to the government and, therefore, cannot be handled
in the same manner as claims.
One commenter stated that the proposed rule implied that
adjustments are allowed, but not required. The intent of the proposed
rule was to clarify, through regulations, how EBT system errors would
be corrected under EBT. It was, therefore, the Department's intent to
require all State agencies to follow these rules. The interim rule
includes clarifying language that makes the adjustment rule mandatory.
Definitions
The proposed rule limited the type of adjustments that could be
processed without advance notice, to system errors resulting in an out-
of-balance settlement condition. Several commenters supported this
restriction, echoing the
[[Page 48935]]
Department's belief that adjustments resulting from human error should
not be included in this rule. Other commenters sought to expand the
definition of adjustments to include monthly issuance-posting errors
and other State agency, non-settling errors. A number of commenters
asked for clarifications regarding the definition of a system error.
The Department agrees that adjustments should be allowed only in
those situations in which a transaction was not completed because of a
system error. A system error is one which occurs due to malfunction at
the EBT host, the third party processor, the retailer host system, the
Point-of-Sale (POS), or as a result of telecommunications malfunctions.
By definition, the amount of an adjustment cannot differ from the value
of the original transaction. (The Department recognizes that the
original transaction amount may no longer be available in a recipient's
account at the time of the adjustment and will allow an adjustment
against remaining benefits, even if it differs from the original
transaction amount). This definition is in keeping with commercial
operating rules and the QUEST EBT operating rules.
Human errors, such as those that may result in incorrect postings,
incorrect entries at the POS by the clerk, operating in training mode,
etc., are not covered by this rule. The Department believes the
household should have the right to advance notice on these more
questionable ``adjustments'' to their allotments. Human errors do not
leave the same audit trail that system errors do, i.e., documentation
of an out-of-balance condition, such as system logs that are generated
from any of the reconciliation points.
Monthly-issuance posting errors are pre-issuance errors and, as
such, are not within the rule's definition of an adjustment; however,
the Department recognizes the need for State agencies to expeditiously
correct these errors. The Department will take this comment under
consideration for future proposed rulemaking.
Future Month's Benefits
The proposed rule did not allow a debit adjustment from a
recipient's account to be made from a future month's benefit, i.e.,
benefits that were not in the account at the time of the error.
Commenters overwhelmingly disagreed with this restriction, arguing that
the restriction in the proposed rule increases the probability that the
funds will not be available to do a debit adjustment to the household's
account. These commenters also argued that restricting adjustments
against a future month also puts an unfair burden on retailers who may
suffer a loss of revenue if recipients spend benefits prior to an
adjustment being made. Finally, many commenters raised concerns about
the administrative burdens inherent in using the re-presentation
process when collecting from future month's benefits.
The Department has been persuaded by the commenters that adjusting
from future months' benefits prevents retailers from having to bear an
unfair financial burden due to system errors. Further, since this rule
only applies to situations in which the need for an adjustment can be
clearly documented, we are confident that there is a minimal risk that
recipients will have their accounts adjusted erroneously. The
Department understands that the average debit adjustment to a household
is relatively small. This is consistent with overall transaction data
that shows the average EBT transaction amount is $20. This would lead
us to project that, on average, most transactions requiring adjustments
would not be large enough to cause a hardship to a food stamp
household, where the average benefit amount is $173. This average
transaction amount is also well below the $50 currently allowed in the
first month of a re-presentation against the household. The interim
final rule is, therefore, changed to allow an adjustment against a
future month's benefit. This includes future months in which there has
been a break in receipt of benefits.
In implementing this change to the proposed rule, the Department
will require State agencies to amend training materials to disclose
information to households about adjustments including the possibility
that an adjustment can be made against a future month's benefit.
Training material must also inform the households of their right to a
fair hearing if they do not feel that the adjustment is warranted, and
their right to receive a credit for the adjustment amount, pending a
fair hearing decision. States that have already implemented EBT will
have one year from the date of this notice to grandfather disclosure
information on adjustments into their training materials.
Notice and Fair Hearing Requirement
The proposed rule required State agencies to send a concurrent
notice when an adjustment was done that would adversely affect the
household. The notice would give households the right to a fair hearing
and the right to be credited for the adjustment amount pending the
outcome of the fair hearing. The majority of comments received on this
subject did not agree with the notice and fair hearing requirements for
EBT adjustments. Most commented that it was inappropriate to apply
these requirements to adjustments because they believe notice
requirements in the program rules should be limited to circumstances in
which benefits are being reduced to collect a previous overissuance of
benefits. There were also a number of concerns about the cost of
mailing notices, as well as the coordination required between the State
agency and the processor, since the processor usually does not have
current household addresses. Several commenters, however, supported the
application of the notice and hearing requirements, including one which
suggested that the Department prescribe the level of detail that should
be in the notice. Three commenters supported the adequate notice as
opposed to a 10-day advance notice. Another commenter suggested that a
notice not be sent as long as the adjustment was done within 5 days as
required by the proposed rule.
The Department is not convinced that adjustments should be exempt
from the notice requirement. The Food Stamp Act gives recipients
certain rights which cannot be abrogated because of the logistical
problems inherent in providing the notice. Nor does the fact that these
are transactional errors as opposed to benefit overissuances nullify
this right. Section 11(e)(10) of the FSA requires State agencies to
provide ``for the granting of a fair hearing and a prompt determination
thereafter to any household aggrieved by the action of the State agency
under any provision of its plan of operation as it affects the
participation of such household in the food stamp program or by a claim
against the household for an overissuance.'' (emphasis added) Further,
in Goldberg v. Kelly, 397 U.S. 254 (1970), the Court ruled that, where
``basic subsistence is at stake,'' due process requires that households
receive notice and an opportunity for a fair hearing prior to the
denial of such government benefits. Absent a guarantee that there is
absolutely no chance of erroneous adjustments, the Department concludes
that households shall retain their notice and fair hearing rights. The
level of detail required in the notice is described in 7 CFR 273.13,
i.e., State agencies are required to include information about the
circumstances which resulted in the adverse action. States are
encouraged to include as much detail about the transaction--date, time
and location--as possible, since
[[Page 48936]]
such information could reduce calls to the Help Desk.
States have requested clarification on the timeframes for the fair
hearing. The interim rule has been clarified to state that the
household has 90 days from the date of the notice to request a fair
hearing. Further, the household has 10 days from the date of the notice
to request a re-credit or provisional credit pending the fair hearing
decision. Two commenters suggested that a notice (with attendant fair
hearing rights) only be required when there has been an incorrect
adjustment. For the reasons cited above, the Department believes that
all actions taken to reduce the household's allotment are subject to
notice.
Two commenters questioned the cost effectiveness of sending a
notice when the adjustment is a credit to the client. The notice and
fair hearing requirements found in 7 CFR 273.13 and 273.15 only apply
to adverse action; therefore, an adjustment which resulted in a credit
to a household would not require a notice.
One commenter suggested that the State be required to send the
notice, not the contractor. The Department does not want to prescribe
how the notice requirement is handled but, instead, prefers to give
each State agency and their processor an opportunity to develop a
process that works in their unique environment.
Finally, two commenters objected to the State agencies paying a
share of administrative costs associated with mailing out notices,
handling appeals, and handling re-credits or provisional credits. The
Department has no authority in Federal law to pay more than the federal
financial participation for food stamp administrative costs, and
therefore, cannot pay the States' share.
Re-Credits (Provisional Credits)
A number of other comments related to re-crediting or provisional
credits pending a determination of the fair hearings. Some commenters
objected to re-crediting pending a fair hearing, while an equal number
of those commenting in this area supported it. A few commenters
requested clarification on how to handle re-credits, specifically who
is liable when an adjustment is due, how re-credits should be funded,
and how they should be reported. Some commenters thought the State
agency or the processors should be liable, not the retailers.
The Department is clarifying that provisional credits should be
handled as any other adjustment. If a household requests a provisional
credit pending a fair hearing, the State agency must notify the
processor to initiate another adjustment to credit the recipient's
account. If the original adjustment was already completed, and payment
made to the party suffering the loss, then that account must be debited
in order to give a provisional credit to the household.
Two commenters opposed language that allowed State agencies to
discontinue collection activity when households and/or retailers were
no longer on the program. The Department believes that by allowing an
adjustment against future month's benefits, it is simplifying the
management controls necessary to collect from households if they return
to the program after a break in assistance. Therefore, language stating
that households that have left the program are not subject to further
collection activity has been removed. Similarly, the proposed rule did
not require processors or others such as third party processors to
collect against a household when the retailer is no longer with the
Food Stamp Program. The Department is not persuaded to change its
position regarding retailers. FNS recognizes that once retailers leave
the system they are not easily tracked and wishes to reduce the
administrative burden on State agencies by not requiring them to
further track retailers. However, collections made from clients that
are not credited to retailers must be returned to FNS.
The Department is also clarifying the interim rule by changing the
term ``re-credits'' to ``provisional credits'' to keep the language in
line with commercial nomenclature.
Timeframes
Most of the commenters believed that the proposed 5-day timeframes
to complete an adjustment were too short given the actions that must
take place and the number of participants inherent in the adjustment
process. The processes described by the commenters include compilation
of documentation, research, notification to other participants and
making the adjustment--more business partners in the chain add to the
processing time. Some commenters estimated that the process in the
commercial environment typically takes from 10-45 days, influenced by
uncontrollable factors, such as retailers who don't settle daily. The
Department has taken these comments into consideration and has modified
the interim rule. The interim rule distinguishes between adjustments
generated by retailers and recipients.
We believe that most recipient generated adjustments will result in
funds owed to the household. In these scenarios, recipients have
suffered a loss through no fault of their own, ostensibly through a
verifiable system error. By allowing an adjustment against a future
month's benefit, the Department is giving the processor the opportunity
to do an adjustment prior to a full investigation, if required, without
risk of liability if a household is erroneously credited. The
Department wishes to emphasize that the provisions of this interim rule
also apply to ``correcting adjustments'', i.e., those adjustments
generated to reverse an erroneous credit to a recipient's account.
Therefore, for client initiated adjustments, the 5-day timeframe
remains as proposed.
Commenters identified several scenarios where either the retailer,
the client, or the processor would be unaware of an error until well
after it has occurred. After reviewing the comments, the Department
determined that the timeframes for client initiated adjustments should
be counted from the date the household notifies the State agency of the
error. This distinction is critical since EBT recipients do not receive
monthly statements and, therefore, may not be aware of an error until
the next time they attempt to do a transaction. The problem is
exacerbated by the fact that a system error often results in an
incorrect receipt. For these reasons, the rule has been changed. Client
initiated adjustments shall be made within 5 business days of the date
the household notifies the State agency or the Help Desk of the error.
The household has 180 days from the date the error occurred to make the
notification. This requirement does not absolve the State agency/
processor from making the adjustment if the 5-day deadline is missed.
The Department acknowledges that retailer and client initiated
adjustments are handled differently. The retailer has access to
settlement information from the processor or third party. Several
commenters stated that not all retailers, particularly small ones,
settle on a daily basis and would not know of an error until after the
5-day timeframe had passed. The Department has been persuaded by these
arguments and has modified the rule. Retailer initiated adjustments
must be completed within 10 days from the date the error occurred.
Retailer initiated adjustments that result in a debit to the
household's account are not allowed after 10 days.
One commenter requested that correction of benefits should be done
in 24 hours, whenever possible. The Department wishes to emphasize the
importance to both State agencies and processors of making adjustments
as quickly as possible. However, 24 hours
[[Page 48937]]
is not a reasonable expectation given the number of parties that are
typically involved in the process.
One commenter thought the Department should put specific deadlines
on each business partner in the process, i.e. prescribe timeframes to
the third parties, processors, retailers, contractors, etc. for
handling their own segment of the process. The Department believes that
such an approach would be administratively burdensome. We realize,
however, that each of these partners has a responsibility to the others
to handle their portion expeditiously if timeframes are to be met. We
would recommend that this level of detail be addressed in retailer and
third party agreements.
The rule has been re-written to clarify that these provisions apply
to both credit and debit adjustments. The rule is also being clarified
to state that business days means Automated Clearing House (ACH) days.
One commenter wanted clarification on the ramifications of not
meeting timeframes. This rule will not impose penalties for not meeting
timeframes. As with other regulatory requirements, States are required
to ensure the processor's compliance.
Investigations
One commenter thought the rule should be more prescriptive in the
area of dispute resolutions: such as, requiring control numbers on
complaints taken at customer service, providing detailed instructions
for investigating claims, etc. The commenter went on to suggest that
the burden of proof be on the retailer in investigating disputes.
The Department is not convinced that this rule should provide more
details in investigating system error adjustment claims. The rule
covers a very limited type of error, not unlike those handled routinely
in the commercial environment. Since there is nothing unique to a food
stamp adjustment that would require the Department to justify deviation
from existing practices, the interim final rule will remain silent on
details for investigating these types of errors. Processors, third
parties, retailers and customer service representatives should follow
industry practice in ensuring that investigations are handled correctly
in a timely manner.
Re-Presentations
As stated in the preamble to the proposed rule, the Department has
heard from States and processors that the current re-presentation
regulations present costly programming challenges. In an effort to
provide some relief, the proposed rules allowed a second collection
option for States: a flat $10 or 10% of the allotment from the first
month. This eliminated the need to program up to $50 for the first
month and a different retention for the remaining months. Most of the
commenters believed that, even with the proposed changes, re-
presentation remains an unworkable and inefficient way of handling
collections. Some commenters stated that the programming involved would
still be expensive, and the monthly accounting would take up too much
in resources. FNS believes that the change to allow adjustments to
future month's benefits for system errors will obviate the need for re-
presentations in most circumstances covered by this rule. However, the
need for re-presentations remains for those cases in which there has
been system downtime. Therefore, the Department is finalizing the rule
to allow the State agency to collect at the current rate of $50 in the
first month and 10% thereafter, or to go to the flat monthly rate of
$10 or 10%, as proposed.
Several commenters asked for clarification on whether or not re-
presentation becomes mandatory under this rule. Another commenter
suggested that re-presentation should be mandatory. The Department is
clarifying that re-presentation remains voluntary under this rule since
most States have not been willing to incur the associated costs.
One commenter requested clarification on who holds the funds during
re-presentation and who holds the outstanding account. In a re-
presentation scenario, the money is collected by the State agency on
behalf of the party to whom the debt is owed. The State agency would
pass the payments to the parties owed through the processor.
Finally, one commenter asked for clarification on re-presentation
since the term is not used in the same way as the QUEST Operating
Rules. The Department recognizes that re-presentation, as used in this
rule, is unique to the Food Stamp Program. Any references to re-
presentation are used in the context of 7 CFR 274.12(e). Food Stamp
Program regulations and QUEST Operating Rules, are mutually exclusive,
since all States have not adopted the QUEST rules and the Food Stamp
Program regulations take precedence over the QUEST rules.
Implementation
This interim rule is effective October 12, 1999. State agencies
must implement the rule no later than March 9, 2000.
List of Subjects
7 CFR Part 272
Alaska, Civil Rights, Food Stamps, Grant Programs-social programs,
Reporting and recordkeeping requirements.
7 CFR Part 273
Administrative practice and procedures, Aliens, Claims, Food
stamps, Grant programs-social programs, Penalties, Reporting and
recordkeeping requirements, Social security, Students.
7 CFR Part 274
Administrative procedures and practices, Food Stamps, Grant
programs-social programs, Reporting and recordkeeping requirements.
Accordingly, for the reasons set forth in the preamble, 7 CFR Parts
272, 273 and 274 are amended as follows:
1. The authority citation for 7 CFR Parts 272, 273 and 274
continues to read as follows:
Authority: 7 U.S.C. 2011-2036.
PART 272--REQUIREMENTS FOR PARTICIPATING STATE AGENCIES
2. In Sec. 272.1, paragraph (g)(154) is added to read as follows:
Sec. 272.1 General terms and conditions.
* * * * *
(g) Implementation. * * *
(154) Amendment No. 378. The provisions of Amendment No.378 are
effective October 12, 1999. State agencies must implement the rule no
later than March 7, 2000. Any variances resulting from implementation
of the provisions of this amendment shall be excluded from error
analysis for 120 days from this required implementation date in
accordance with Sec. 275.12(d)(2)(vii) of this chapter.
PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS
3. In Sec. 273.13, a new paragraph (a)(3)(vii) is added to read as
follows:
Sec. 273.13 Notice of adverse action.
(a) * * *
(3) * * *
(vii) An EBT system-error has occurred during the redemption
process, resulting in an out-of-balance settlement condition. The State
agency shall adjust the benefit in accordance with Sec. 274.12 of this
chapter.
* * * * *
4. In Sec. 273.15, the fourth sentence of paragraph (k)(1) is
revised and two new
[[Page 48938]]
sentences are added after the fourth sentence to read as follows:
Sec. 273.15 Fair hearings.
* * * * *
(k) Continuation of benefits.
(1) * * * If the State agency action is upheld by the hearing
decision, a claim against the household shall be established for all
overissuances, with one exception. In the case of an EBT adjustment,
the State agency shall debit the household's account immediately for
the total amount erroneously credited when the fair hearing was
requested. If there are no benefits remaining in the household's
account at the time the State agency action is upheld, the State agency
shall make the adjustment from the next month's benefits, subject to
the limitations of this section and, if necessary, continue each month
until the debt is re-paid. * * *
* * * * *
PART 274--ISSUANCE AND USE OF COUPONS
5. In Sec. 274.12:
a. Paragraph (f)(4) is revised;
b. Paragraph (f)(7)(iii) is amended by removing the second
sentence;
c. A new paragraph (f)(10)(viii) is added;
d. Paragraph (l)(1)(iii) is revised;
The revisions and addition read as follows:
Sec. 274.12 Electronic Benefit Transfer issuance system approval
standards.
* * * * *
(f) Household participation * * *
(4) Issuance of Benefits. State agencies shall establish an
availability date for household access to their benefits and inform
households of this date.
(i) The State agency may make adjustments to benefits posted to
household accounts after the posting process is complete but prior to
the availability date for household access in the event benefits are
erroneously posted.
(ii) A State agency shall make adjustments to an account after the
availability date to correct an auditable, out-of-balance settlement
condition that occurs during the redemption process as a result of a
system error. A system error is defined as an error resulting from a
malfunction at any point in the redemption process: from the system
host computer, to the switch, to the third party processors, store host
computer or POS device. By definition, an adjustment must be equal to
the amount of the original error transaction and may result in either a
debit or credit to the household.
(A) Client initiated adjustments shall be made no later than 5
business days from the date the household notifies the State agency of
the error. Business days are defined as Automated Clearing House (ACH)
days.
(B) The household has 180 days from the date of the error to notify
the State agency of the need for an adjustment.
(C) Retailer initiated adjustments shall be made no later than 10
business days from the date the error occurred.
(D) If there are insufficient benefits remaining to cover the
entire adjustment, the adjustment shall be made using the remaining
balance, with the difference being subject to collection in a future
month, subject to the limitations found in Sec. 273.15 of this chapter
and in this section.
(E) The household shall be given, at a minimum, adequate notice in
accordance with Sec. 273.13 of this chapter.
(F) The household shall have 90 days from the date of the notice to
request a fair hearing.
(G) Should the household dispute the adjustment and a request is
made within 10 days of the notice, a provisional credit must be made to
the household's account pending resolution.
(iii) The appropriate management controls and procedures for
accessing benefit accounts after the posting shall be instituted to
ensure that no unauthorized adjustments are made in accordance with
paragraph (f)(7)(iii) of this section.
* * * * *
(10) * * *
(viii) Disclosure information regarding adjustments and the
households rights to notice, fair hearings and provisional credits. The
disclosure should also state where to call to dispute an adjustment and
request a fair hearing. State agencies that have already implemented
EBT shall have one year in which to grandfather adjustment disclosure
into their training materials.
* * * * *
(l) Re-presentation. * * *
(1) * * *
(iii) The State agency may debit the benefit allotment of a
household following the insufficient funds transaction in either of two
ways:
(A) Any amount which equals at least $10 or up to 10% of the
transaction. This amount will be deducted monthly until the total
balance owed is paid-in-full. State agencies may opt to re-present at a
level that is less than the 10% maximum, however, this lesser amount
must be applied to all households.
(B) $50 in the first month and the greater of $10 or 10% of the
allotment in subsequent months until the total balance owed is paid-in-
full. If the monthly allotment is less than $50, the State shall debit
the account for $10.
* * * * *
Dated: August 23, 1999.
Samuel Chambers, Jr.,
Administrator, Food and Nutrition Service.
[FR Doc. 99-23410 Filed 9-8-99; 8:45 am]
BILLING CODE 3410-30-U
