[Federal Register Volume 63, Number 96 (Tuesday, May 19, 1998)]
[Proposed Rules]
[Pages 27511-27514]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-13227]
-----------------------------------------------------------------------
DEPARTMENT OF AGRICULTURE
Food and Nutrition Service
7 CFR Parts 273 and 274
RIN 0584-AC61
Food Stamp Program: Electronic Benefits Transfer Benefit
Adjustments
AGENCY: Food and Nutrition Service, USDA.
ACTION: Proposed Rule.
-----------------------------------------------------------------------
SUMMARY: This rule proposes to revise Food Stamp Program regulations
pertaining to State agencies' ability to make adjustments to a
recipient account in an Electronic Benefits Transfer (EBT) system, in
order to correct a system error or an out-of-balance condition. EBT
stakeholders have proposed the changes so that States and their
processors can correct errors when they are identified, rather than 10
days after the advance notice has been sent to the household. The
changes would enable State agencies to correct errors in a more timely
manner, and bring EBT closer in line with current commercial Electronic
Funds Transfer (EFT) practices. This rule also proposes to revise the
formula
[[Page 27512]]
for recovering funds under the re-presentation rule.
DATES: Comments must be received on or before July 20, 1998, to be
assured of consideration.
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 datafaxed to the attention of Mr.
Cohen at (703) 605-0232, or by e-mail to jeff__cohen@fcs.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 address or by telephone
at (703) 305-2517.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This proposed 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 aggregrate, 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 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 part 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). Shirley Watkins,
the Under Secretary for Food, Nutrition and Consumer Service, has
certified that this proposed 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 12778
This rule has been reviewed under Executive Order 12778, 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 ``Effective Date'' 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 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 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
Adjustments
The Food and Nutrition Service (FNS) has been contacted by a number
of State agencies and other interested stakeholders regarding its
policy on making adjustments to EBT-issued benefits when a system error
has resulted in an out-of-balance condition. During normal EBT
processing for an authorized transaction, 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. For
purposes of this proposed regulation, an out-of-balance settlement
condition exists when system errors or other technical malfunctions
cause an interruption to the end-to-end settlement process from
acquirer back to issuer, resulting in a settlement condition that does
not reflect the authorized transaction. In the commercial EFT
environment, such conditions are routinely corrected via a manual
adjustment to the customer's account without notification to the
account holder. In this proposed rule, an adjustment is defined as a
debit or credit transaction initiated to correct a system error or to
correct an out-of-balance condition identified in the settlement
process. Current food stamp regulations, however, do not allow such
adjustments without prior notification to the food stamp household.
Regulations found at 7 CFR 274.12(f)(4) require that State agencies
establish a date when the household's benefits become available to them
each month. By regulation, State agencies are not allowed to make
adjustments to the food stamp allotment after the availability date.
This is in keeping with the coupon system which has no mechanism to
retrieve benefits after they have been issued to the household.
However, FNS recognizes that EBT provides additional tools that were
not available in the coupon system. Corrections to technical errors can
be made quickly and accurately, where previously, in the paper system,
they could not be made. Commercial operating rules for EFT systems and
the QUEST EBT operating rules have provisions which require adjustments
for system errors. (The QUEST operating rules set forth EBT
requirements for those state agencies that choose to issue benefits
under the QUEST service mark.) This proposed rule would allow
adjustments, after the availability date, to correct a system error.
[[Page 27513]]
Proposing this change leads to the need to propose a second change.
Section 11(e)(10) of the Food Stamp Act of 1977, as amended, gives
households the right to a fair hearing over any action that affects
their participation in the program. This section stipulates that to
exercise this right households must request a fair hearing in a timely
manner following receipt of an individual notice of the agency's
action. Further, households have the right to delay the State agency's
action and receive benefits at the previous level, pending a decision
by the hearing official. Regulations implementing these provisions of
the Act and signifying when a notice of action is necessary are found
in Sec. 273.15.
With some exceptions, which are specified in the regulation,
households must be given an advance notice of 10 days before reduction
in benefits can be put in place. The excepted situations in the
regulation allow for concurrent benefit adjustment and notice--referred
to as adequate notice. That is, State agencies are allowed to notify
households at the same time as an action is taken.
The nature of EBT settlement adjustments makes timeliness critical.
A 10-day advanced notice, as required by current regulation, could have
a negative impact on the State agency's ability to correct the out-of-
balance condition. For example, to provide notice 10 days prior to the
adjustment action could risk benefits no longer being available since,
unlike certification actions, the household has immediate access to the
benefits in question. For this reason, in Sec. 273.13(a)(3)(vii), we
propose that State agencies be allowed to send an adequate notice when
the action is taken. This would allow the error condition to be
corrected expeditiously, while preserving the household's right to
adequate notice and a fair hearing.
In order to ensure that the rights of the household are protected,
this rule proposes to only allow adjustments under the following
conditions:
(1) Adjustments would not be allowed against future month benefits,
i.e, against those benefits that were not in the account at the time of
the original transaction.
(2) In those cases in which a household no longer has benefits
available from the issuance month, this rule proposes that the funds
may be recovered using the re-presentation procedures set forth in 7
CFR 274.12(l). If, however, there are sufficient benefits remaining to
cover only part of the adjustment, the adjustment may be made using the
remaining balance, with the difference being subject to the re-
presentation procedures.
(3) If the household is no longer receiving benefits, the State
agency is under no further obligation to recover the funds.
(4) The household shall be given adequate notice at the time of the
adjustment in accordance with procedures set forth in 7 CFR
273.13(a)(3). An adequate notice includes an explanation of the action
being taken, the reason for the action, the household's right to a fair
hearing, and the household's right to continued benefits.
(5) If the household chooses to have a fair hearing and elects to
have benefits continued pending the fair hearing decision, the State
agency would be required to re-credit the adjusted amount until the
dispute is adjudicated. If the hearing finds in favor of the State
agency, the State agency would re-process the adjustment (debit) for
the full amount credited at the time of the fair hearing request. 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 benefit. If the household is no longer
receiving benefits when the fair hearing decision is rendered, the
State agency would be under no further obligation to recover the funds.
An adjustment would not be made if the affected retailer is no longer
on the EBT system.
(6) Adjustments would only be allowed when auditable documentation
is available to substantiate the out-of-balance condition.
Finally, it has come to the Department's attention that EBT
regulations do not provide time frames by which system errors must be
resolved. The Department, therefore, proposes that all system errors be
corrected within 5 business days. After 5 business days, any recovery
of funds from a recipient's account must be handled through the re-
presentation process. The Department believes that unless the
adjustment is made within a reasonable time, recipients will be unable
to understand the connection between the original transaction and the
adjustment action. The 5-day time frame also ensures that households
negatively impacted by a system error will not have to wait
unreasonably long periods of time for resolution.
Re-presentations
Current regulations give State agencies the option to implement a
re-presentation system to recoup certain losses in instances specified
in 7 CFR 274.12(l). Regulations at 7 CFR 274.12(l)(1)(iii) stipulate
that the rate of re-presentation be $50 for the first month and $10 or
10 percent--whichever is greater--in subsequent months, until the re-
presentation is completely repaid. These amounts were originally
selected so that the electronic system would be consistent with the
claims process in place in the coupon system. Some State agencies have
argued that the variation in the rate of re-presentation for the first
month and subsequent months makes it particularly difficult to
implement an automated re-presentation system. Currently, only one
State agency has implemented re-presentation because of the burden of
programming a system which would meet these requirements. Therefore,
the Department proposes that the required rate differentiation between
the first month and subsequent months be eliminated; the State agency
would have the option to debit the benefit allotment of a household
following the insufficient funds transaction in an amount equal to at
least $10, but no higher than 10 percent of the allotment. This
deduction would be repeated on a monthly basis until the re-
presentation is completely repaid. State agencies may choose to recover
funds at an amount less than 10% of the allotment, but shall apply the
lesser repayment amount to all households.
Implementation
The Department is proposing that the provisions of this rulemaking
be implemented 30 days after publication of the final rule. The
Department also proposes to allow variances resulting from
implementation of the provisions of the final rule to be excluded from
error analysis for 120 days from the required implementation date, in
accordance with 7 CFR 275.12(d)(2)(vii).
List of Subjects
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
273 and 274 are proposed to be amended as follows:
[[Page 27514]]
1. The authority citation for 7 CFR parts 273 and 274 continues to
read as follows:
Authority: 7 U.S.C. 2011-2032.
PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS
2. 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.
* * * * *
3. In Sec. 273.15, the fourth sentence of paragraph (k)(1) is
revised and three new 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 except in the case of an EBT adjustment, in which case
another adjustment (debit) shall be made immediately to the household's
account 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. If the
household is no longer receiving benefits at the time of the fair
hearing decision, the State agency is under no further obligation to
recover the debt. An adjustment shall not be done if the affected
retailer is no longer on the EBT system. * * *
* * * * *
PART 274--ISSUANCE AND USE OF COUPONS
4. In Sec. 274.12:
a. Paragraph (f)(4) is revised;
b. Paragraph (f)(7)(iii) is amended by removing the second
sentence;
c. Paragraph (l) introductory text is redesignated as the first
sentence of paragraph (l)(1) introductory text;
d. Paragraph (l)(1) introductory text is amended by redesignating
the last sentence as the introductory text of paragraph (l);
e. Paragraph (l)(1)(iii) is revised;
f. Paragraphs (l)(2), (l)(3), (l)(4), and (l)(5) are redesignated
as (l)(3), (l)(4), (l)(5), and (l)(6); and
g. A new paragraph (l)(2) is added.
The revisions and additions read as follows:
Sec. 274.12 Electronic Benefit Transfer system issuance 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 may make adjustments to an account after the
availability date only to correct an auditable, out-of-balance
settlement condition that occurs during the redemption process as a
result of a system error.
(A) Adjustments shall be made no later than 5 business days after
the out-of-balance condition occurred.
(B) Adjustments shall not be made against a future month's benefit.
If there are sufficient benefits remaining to cover only part of the
adjustment, the adjustment may be made with the remaining balance.
(C) The household must be given, at a minimum, adequate notice in
accordance with Sec. 273.13 of this chapter.
(D) Should the household dispute the adjustment, the benefits must
be re-credited to the household's account pending resolution.
(E) Should a State agency wish to process an adjustment against
future month benefits, such an action shall be in accordance with re-
presentation procedures found in paragraph (l) of this section.
(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.
* * * * *
(l) Re-presentation. * * *
(1) * * *
(iii) The State agency may debit the benefit allotment of a
household following the insufficient funds transaction in any amount
which equals at least $10 or up to 10% of the transaction. This amount
will be deducted monthly until the total owed is paid. 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.
(2) When a system-error has resulted in an out-of-balance condition
at settlement, and the State agency is unable to recover an erroneous
credit as an adjustment, a re-presentation may be made as follows:
(i) the state agency shall debit the benefit allotment of a
household monthly in an amount equal to at least $10 or up to 10% of
the allotment until the re-presentation is completely paid.
(ii) notice shall be provided prior to the month re-presentation
occurs and shall state the amount of the reduction in the benefit
allotment.
* * * * *
Dated: May 12, 1998.
George A. Braley,
Acting Administrator, Food and Nutrition Service.
[FR Doc. 98-13227 Filed 5-18-98; 8:45 am]
BILLING CODE 3410-30-U
