[Federal Register Volume 77, Number 104 (Wednesday, May 30, 2012)]
[Proposed Rules]
[Pages 31738-31742]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-12907]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 77, No. 104 / Wednesday, May 30, 2012 /
Proposed Rules
[[Page 31738]]
DEPARTMENT OF AGRICULTURE
Food and Nutrition Service
7 CFR Parts 271 and 274
RIN 0584-AE26
Supplemental Nutrition Assistance Program: Trafficking Controls
and Fraud Investigations
AGENCY: Food and Nutrition Service, USDA.
ACTION: Proposed rule.
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SUMMARY: The Food and Nutrition Service (FNS) is proposing to amend
Supplemental Nutrition Assistance Program (SNAP or Program) regulations
at 7 CFR 274.6 to allow State agencies to deny a request for a
replacement card until contact is made with the State agency, if the
requests for replacement cards are determined to be excessive. State
agencies that elect to exercise this authority will be required to
protect vulnerable persons, such as individuals with disabilities,
homeless individuals, or the elderly, who may repeatedly lose EBT cards
but are not committing fraud. FNS proposes to also change the
Electronic Benefit Transfer (EBT) card replacement timeframes in the
same section to require State agencies to make replacement cards
available for pick up or to place the card in the mail within one
business day following notice by the household to the State agency that
the card has been lost or stolen. This proposed rule would further
amend regulations at 7 CFR 271.2 to clarify the definition of
trafficking to include the intent to sell SNAP benefits in cases where
an individual makes the offer to sell their benefits and/or EBT card
online or in person so the State may pursue an intentional Program
violation (IPV) against the individual who made the offer.
DATES: To be assured of consideration, comments on this proposed rule
must be received by the Food and Nutrition Service on or before July
30, 2012.
ADDRESSES: The Food and Nutrition Service, USDA, invites interested
persons to submit comments on this proposed rule. Comments may be
submitted by one of the following methods:
Federal e-Rulemaking Portal: Go to http://www.regulations.gov. Preferred method; follow the online instructions
for submitting comments on docket [FNS-2012-0028].
Fax: Submit comments by facsimile transmission to: Jane
Duffield, Chief, State Administration Branch, Fax number 703-305-0928.
Mail: Comments should be addressed to Jane Duffield, State
Administration Branch, 3101 Park Center Drive, Alexandria, VA 22302.
Hand Delivery or Courier: Deliver comments to the Jane
Duffield, State Administration Branch, 3101 Park Center Drive,
Alexandria, VA 22302, Room 818, Monday-Friday, 8:30 a.m.-5:00 p.m.
All comments submitted in response to this proposed rule will be
included in the record and will be made available to the public. Please
be advised that the substance of the comments and the identity of the
individuals or entities submitting the comments will be subject to
public disclosure. FNS will make the comments publicly available on the
Internet via http://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Jane Duffield at 703-605-4385.
SUPPLEMENTARY INFORMATION:
I. Background
In this rule, FNS is proposing to amend the SNAP regulations at 7
CFR 274.6 to give States an option for handling requests for multiple
replacement cards. Current regulations do not allow State agencies to
require clients requesting multiple replacement cards to contact the
agency and provide an explanation before a new card is issued, even
though such requests sometimes indicate fraudulent activity. Under this
rule, States could choose to withhold the benefit card when the client
has requested an excessive number of replacements, until the client
makes contact with the State agency and provides an explanation for the
request. State agencies taking up this option would be expected to
establish a threshold beyond which contact must be made, but in no
instance may that threshold be fewer than four cards in a 12 month
period prior to the request, except as provided below. The proposed
minimum threshold is based on an analysis by FNS of electronic
transaction data that demonstrates a statistically significant
difference when a client reaches his or her fourth replacement card,
indicating that transaction activity is three times more likely to be
flagged as potential trafficking, which is the exchange of benefits for
cash or other consideration, compared to clients with three or fewer
replacement cards. The State agency would need to notify the client
when he or she reaches the threshold for excessive card replacements,
as determined by the State agency, and indicate what actions the State
agency would take if the client requests another card replacement. The
State agency would be expected to refer clients to the fraud
investigation unit that respond to the agency request for contact but
do not provide an appropriate explanation for such requests and must
issue a replacement card while the investigation is ongoing. In all
cases, States would be required to protect vulnerable persons who lose
EBT cards but are not committing fraud.
FNS proposes to further amend 7 CFR 274.6 to change the EBT card
replacement timeframes. Currently, State agencies must ensure that
clients receive replacement EBT cards within two business days (or five
business days if using a centralized mail issuance system) after the
client notifies the State agency that the card has been lost or stolen.
The proposed changes would place the requirement on the mailing end
instead of the receiving end by requiring State agencies to make
replacement cards available for pick up or to place the card in the
mail within one business day following notice by the client. The
proposed change would alleviate State agencies' responsibility for mail
delays beyond their control. Finally, this proposed rule would also
clarify the definition of trafficking to include actions that clearly
express the intent to sell SNAP benefits or EBT cards in person or
online through web sites and social media.
Allow States To Withhold Replacement Cards Until Contact Is Made With
the State Agency
FNS proposes to amend regulations in order to provide States with
options
[[Page 31739]]
when clients request an excessive number of EBT card replacements.
States would be able to withhold a replacement card until the client
makes contact by phone or in-person with the State agency and provides
an explanation for the excessive EBT card requests. The State agency
would need to determine what it considers to be excessive, but the
threshold may not be less than four card replacements requested within
12 months prior to the request; unless the State agency has sufficient,
additional evidence indicating potential misuse that warrants noticing
the client sooner than the fourth card request. These might be
individuals about whom the State agency has gathered other evidence of
suspected fraudulent activity. In these circumstances, the State agency
may require the client to provide an explanation by phone or in person
before the fifth card request, and, if deemed appropriate, refer the
client for investigation. Evidence indicating potential misuse may
include, but is not limited to, transactions made with retailers found
by FNS to be guilty of trafficking, benefit cards that have a zero
balance for both SNAP and cash assistance when the request is made,
cards that follow established patterns of trafficking, etc. Further,
States with sufficient evidence to warrant noticing the client sooner
that the fourth replacement card request are encouraged to begin an
investigation without waiting for the client to request another card.
States would be required to notify clients when clients reach the
threshold number of card replacement requests (not less than upon the
fourth card in 12 months prior to the request or as otherwise provided
by this proposed rule) prior to taking any action upon receiving a
subsequent card replacement request. The notice must inform the client
that the next request for card replacement will require contact with
the State agency to provide an explanation for the requests, before the
replacement card will be issued. The notice must be written in clear
and simple language to ensure that the notice is understood.
Many States currently monitor multiple card replacements as a
possible indicator of trafficking or other suspicious activity.
However, it is difficult for States to prove trafficking on this
information alone. States report that they often ask the client to come
in to speak with them, but many do not respond. Current regulations do
not allow State agencies to require client contact to obtain additional
card replacements. FNS proposes to change the regulations so that State
agencies have this latitude to require contact prior to issuing another
card replacement once a significant threshold has been reached and the
client notified. This change would provide States with another
opportunity to gather potentially important information and to
determine whether assistance or further investigation is warranted.
Providing States with this new option supports FNS' commitment to
Program integrity while maintaining the intent of the Program to
provide nutrition benefits to low income households.
FNS is concerned that when clients request multiple EBT card
replacements over a short period of time, there may be one of two
possible problematic explanations. It may indicate that the client does
not know how to use his or her EBT card properly, and needs additional
help or training to protect the card and access benefits. It may also
indicate that the client has sold his or her card, perhaps repeatedly,
in order to obtain cash or other ineligible items. If the client does
not understand how to use, maintain or protect the card, requiring him
or her to contact the State office, either in-person or by phone, would
allow the State to identify the problem and to assist the client with
using the EBT card. On the other hand, the State agency may determine
through such contacts, that the client is possibly or likely selling
his or her cards, and could then refer him or her to the fraud unit for
further investigation. In either event, the client who contacts the
State agency would be provided a replacement card and must be allowed
to continue to participate. If the client does not contact the State
agency, the card may be held until he or she does so and the case must
be turned over to the fraud unit for further investigation to determine
if there is enough evidence to pursue an Intentional Program Violation
(IPV). If the client does contact the State agency but refuses to
explain the card losses, the card must be provided and the case must be
turned over to the fraud unit for further investigation.
This proposed rule would not require States to pursue these cases,
but does provide States with the option to pursue cases when they
determine that the requests for card replacement are excessive. In all
cases, States would be required to protect vulnerable persons who lose
EBT cards but are not committing fraud. FNS is particularly focused on
ensuring that persons who may have a greater tendency to lose multiple
cards for legitimate reasons such as individuals with disabilities,
homeless individuals, or the elderly, are protected and treated
appropriately by State agencies that elect to exercise this authority.
Furthermore, it is FNS's expectation that upon contact, should the
State agency identify that the explanation for the request is
appropriate, the State agency must use the contact to educate the
client on proper use of the card, document this activity, and should
not require contact upon subsequent requests that could be seen as a
barrier to participation. It would only be appropriate to require
contact upon subsequent requests if the pattern of activity has changed
since the initial contact that indicates a likelihood of potential
fraud.
Change the EBT Card Replacement Timeframes
State agencies have the option to provide replacement EBT cards in
person at the local State SNAP office or by mail. For many clients,
having to go into the local SNAP office to pick up a card can present a
substantial barrier to getting a replacement card quickly. However, as
the United States Postal Service (USPS) scales back its delivery
services in many areas, State agencies are finding it more and more
difficult to ensure clients receive replacement EBT cards within the
timeframes required by FNS. Because State agencies do not have control
over the length of time it takes the USPS to get a replacement EBT card
into the hands of a SNAP household, FNS believes it is more appropriate
to prescribe a timeframe by when the State agency must place the card
in the mail instead of when the client must actually receive the card
in the mail. FNS continues to believe that clients who have
legitimately lost their card or had it stolen must receive a
replacement card within a reasonable amount of time to ensure that they
have access to benefits needed to meet their dietary needs. To this
end, FNS is proposing to require State agencies to act on a notice by
the client of a lost or stolen EBT card within one business day. The
State would accomplish this requirement by either providing the client
with a card for pick-up at the local office or by placing the card in
the mail. Similar requirements apply to lost or stolen Personal
Identification Numbers (PINs). However, if a PIN is being mailed in
combination with a card, States would continue to follow industry
standards for mailing PINs separate from the card.
Clarify the Definition of Trafficking
FNS has received numerous reports regarding abuses of the Program
involving attempts to sell SNAP benefits in person or online. In an
effort to combat fraud and abuse, FNS has taken
[[Page 31740]]
many steps to assist States in their ability to identify and further
investigate instances of SNAP fraud, including trafficking, and is
committed to continuing those efforts. To further assist States, FNS
believes it is necessary to clarify the definition of trafficking to
include the intent to sell SNAP benefits online or in person. FNS is
basing these proposed changes on the existing definition of trafficking
while acknowledging that there is another rulemaking in process which
proposed additional changes to the trafficking definition. (76 FR
35787, proposed June 20, 2011). That regulation is not yet final. FNS
will reflect all changes to the existing definition of trafficking in
the final rule at the time of publication.
States have expressed concern with the growing popularity of social
media Web sites as a format for advertising SNAP benefits for sale. The
use of social media networking sites as a vehicle for trafficking SNAP
is an area that needs increased monitoring. FNS has heard from a number
of States and from the public that recipients are posting SNAP benefits
for sale online and that the frequency of this activity is on the rise.
FNS has taken action to discourage several of these Web sites from
posting such advertisements, yet the Agency is aware that it still
occurs.
Clarifying that the definition of trafficking to include activities
demonstrating the intent to sell SNAP benefits would eliminate the
common misunderstanding that one must observe or witness an actual
transaction in order to pursue these cases as IPVs. State agencies can
disqualify a recipient for posting or soliciting SNAP benefits for sale
and assign the appropriate penalty to those individuals, such as
permanent disqualification and criminal penalties, for particularly
egregious offenses. The clarification would also include practices of
individuals who target people outside of grocery stores or other
locations, offering to sell their benefits for cash or other non-
eligible items.
Through discussions with States regarding these issues, FNS has
learned that State agencies have difficulty prosecuting these
individuals because State agencies believe that the current regulations
do not cover these types of activities. By amending the definition, FNS
would be clarifying that an IPV for trafficking occurs when there is an
attempted sale of benefits before the sale is completed. These proposed
changes to regulations would help to ensure that the integrity of the
Program is upheld and the benefits are used as intended.
II. Procedural Matters
Executive Order 12866 and Executive Order 13563
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility.
This proposed rule has been designated non-signficant under section
3(f) of Executive Order 12866.
Regulatory Flexibility Act
This Regulatory Flexibility Act (5 U.S.C. 601-612) requires
Agencies to analyze the impact of rulemaking on small entities and
consider alternatives that would minimize any significant impacts on a
substantial number of small entities. Pursuant to that review, it has
been certified that this rule would not have a significant impact on a
substantial number of small entities. This proposed rule would not have
an impact on small entities because they do not administer SNAP or
investigate suspected intentional Program violations.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public
Law 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
Department generally must prepare a written statement, including a cost
benefit analysis, for proposed and final rules with ``Federal
mandates'' that may result in expenditures by State, local or tribal
governments, in the aggregate, or 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 Department to identify
and consider a reasonable number of regulatory alternatives and adopt
the most cost effective or least burdensome alternative that achieves
the objectives of the rule.
This rule does not contain Federal mandates (under the regulatory
provisions of Title II of the UMRA) for State, local and tribal
governments or the private sector of $100 million or more in any one
year. Thus, the rule is not subject to the requirements of sections 202
and 205 of the UMRA.
Executive Order 12372
The Supplemental Nutrition Assistance Program is listed in the
Catalog of Federal Domestic Assistance Programs under 10.561. For the
reasons set forth in the final rule in 7 CFR part 3015, subpart V, and
related Notice (48 FR 29115, June 24, 1983), this program is excluded
from the scope of Executive Order 12372 which requires
intergovernmental consultation with State and local officials.
Federalism Summary Impact Statement
Executive Order 13132 requires Federal agencies to consider the
impact of their regulatory actions on State and local governments.
Where such actions have federalism implications, agencies are directed
to provide a statement for inclusion in the preamble to the regulations
describing the agency's considerations in terms of the three categories
called for under Section (6)(b)(2)(B) of Executive Order 13121. The
Department has determined that this rule does not have Federalism
implications. This rule does not impose substantial or direct
compliance costs on State and local governments. Therefore, under
Section 6(b) of the Executive Order, a Federalism summary impact
statement is not required.
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
and timely implementation. This rule is not intended to have
retroactive effect unless so specified in the Effective Dates section
of the final rule. Prior to any judicial challenge to the provisions of
the final rule, all applicable administrative procedures must be
exhausted.
Civil Rights Impact Analysis
FNS has reviewed this rule in accordance with the Department
Regulation 4300-4, ``Civil Rights Impact Analysis,'' to identify and
address any major civil rights impacts the rule might have on
minorities, women, and persons with disabilities. After a careful
review of the rule's intent and provisions, FNS has determined that
this rule will not in any way limit or reduce in any way the ability of
protected classes of individuals to receive SNAP benefits on
[[Page 31741]]
the basis of their race, color, national origin, sex, age or
disability.
Executive Order 13175--Consultation and Coordination With Indian Tribal
Governments
Executive Order 13175 requires Federal agencies to consult and
coordinate with Tribes on a government-to-government basis on policies
that have Tribal implications, including regulations, legislative
comments or proposed legislation, and other policy statements or
actions that have substantial direct effects on one or more Indian
Tribes, on the relationship between the Federal Government and Indian
Tribes, or on the distribution of power and responsibilities between
the federal government and Indian Tribes.
A. In the fall of 2010, USDA engaged in a series of consultative
sessions to obtain input by Tribal officials or their designees
concerning the impact of this rule on the tribe or Indian Tribal
governments. The Joint Consultation sessions were coordinated by USDA's
Office of Tribal Relations and held on the following dates and
locations:
1. Rapid City, SD--October 28-29, 2010
2. Oklahoma City, OK--November 3-4, 2010
3. Minneapolis, MN--November 8-9, 2010
4. Seattle, WA--November 22-23, 2010
5. Nashville, TN--November 29-30, 2010
6. Albuquerque, NM--December 1-2, 2010
7. Anchorage, AK--January 10-11, 2011
There were no comments about this regulation during any of the
aforementioned Tribal Consultation sessions.
B. In the spring of 2011, FNS offered opportunities for
consultation with Tribal officials or their designees to discuss the
impact of the Healthy, Hunger-Free Kids Act of 2010 (HHFKA), Public Law
111-296, on tribes or Indian Tribal governments. The consultation
sessions were coordinated by FNS and held on the following dates and
locations:
1. HHFKA Webinar & Conference Call--April 12, 2011
2. Mountain Plains--HHFKA Consultation, Rapid City, SD--March 23, 2011
3. HHFKA Webinar & Conference Call--June, 22, 2011
4. Tribal Self-Governance Annual Conference in Palm Springs, CA--May 2,
2011
5. National Congress of American Indians Mid-Year Conference,
Milwaukee, WI--June 14, 2011
There were no comments about this regulation during any of the
aforementioned Tribal Consultation sessions.
C. In late 2010 and early 2011, USDA engaged in a series of
consultative sessions to obtain input by Tribal officials or their
designees concerning the effect of this and other rules on Tribes or
Indian Tribal governments, or whether this rule may preempt Tribal law.
Reports from the consultative sessions will be made part of the
USDA annual reporting on Tribal Consultation and Collaboration. FNS
will respond in a timely and meaningful manner to Tribal government
requests for any consultation concerning this rule. Currently, FNS
provides regularly scheduled quarterly consultation sessions through
the end of FY2012 as a venue for collaborative conversations with
Tribal officials or their designees.
USDA will offer future opportunities, such as webinars and
teleconferences, for collaborative conversations with Tribal leaders
and their representatives concerning ways to improve rules with regard
to their affect on Indian country.
We are unaware of any current Tribal laws that could be in conflict
with the proposed rule. We request that commenters address any concerns
in this regard in their responses.
Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (44 U.S.C. Chap. 35; see 5 CFR
1320) requires the Office of Management and Budget (OMB) approve all
collections of information by a Federal agency before they can be
implemented. Respondents are not required to respond to any collection
of information unless it displays a current valid OMB control number.
This rule does not contain information collection requirements subject
to approval by OMB under the Paperwork Reduction Act of 1995.
E-Government Act Compliance
The Food and Nutrition Service is committed to complying with the
E-Government Act, to promote the use of the Internet and other
information technologies to provide increased opportunities for citizen
access to Government information and services, and for other purposes.
List of Subjects in 7 CFR Parts 271 and 274
Food stamps, Grant programs--social programs, Reporting and
recordkeeping requirements.
For the reasons set forth in the preamble, 7 CFR parts 271 and 274
are proposed to be amended as follows:
1. The authority citation for 7 CFR parts 271 and 274 continue to
read as follows:
Authority: 7 U.S.C. 2011-2036.
PART 271--GENERAL INFORMATION AND DEFINITIONS
2. In Sec. 271.2, the definition of Trafficking is revised to read
as follows:
Sec. 271.2 Definitions.
* * * * *
Trafficking means the buying, selling, or intent to sell of SNAP
benefits issued and accessed via Electronic Benefit Transfer (EBT)
cards, for cash or consideration other than eligible food; or the
exchange of firearms, ammunition, explosives, or controlled substances,
as defined in section 802 of title 21, United States Code, for coupons.
* * * * *
PART 274--ISSUANCE AND USE OF PROGRAM BENEFITS
3. Paragraph 274.6(b) is amended to read as follows:
a. Revise paragraph (b) introductory text.
b. Add new paragraphs (b)(4) and (b)(5).
The revision and additions read as follows:
Sec. 274.6 Replacement issuances and cards to households.
* * * * *
(b) Providing replacement EBT cards or PINs. The State agency shall
make replacement EBT cards available for pick up or place the card in
the mail within 1 business day following notice by the household to the
State agency that the card has been lost or stolen; unless the State
implements a replacement procedure pursuant to paragraph (b)(5) of this
section.
* * * * *
(4) The State agency shall provide replacement PINs in accordance
with Sec. 274.2(f) and within the same timeframes prescribed for
replacement EBT cards in this paragraph. Notwithstanding the previous
sentence, the State agency must follow standard industry practices for
PINs mailed in combination with a card.
(5) Multiple requests for replacement cards. The State agency may
require an individual or household to provide an explanation by phone
or in person in cases where the number of requests for card
replacements is determined excessive. If they so require, the State
agency must establish a threshold for the number of card replacements
during a specified period of time to be
[[Page 31742]]
considered excessive, but that threshold shall not be less than four
(4) cards requested within twelve (12) months prior to the request;
unless the State agency has sufficient, additional evidence indicating
suspected intentional Program violation, as defined at Sec. 273.16(c)
of this chapter, which would warrant noticing the client sooner than
the fourth card request, requiring the individual or household to
provide an explanation by phone or in person before the fifth card
request, and, if deemed appropriate, referring the client for
investigation.
(i) The State agency must notify the household in writing when it
has reached the threshold, indicating that the next request for card
replacement will require contact with the State agency to provide an
explanation for the requests, before the replacement card will be
issued. The notice must:
(A) Be written in clear and simple language;
(B) Meet the language requirements described at Sec. 272.4(b) of
this chapter;
(C) Specify the number of cards requested and over what period of
time;
(D) Explain that the next request will require contact with the
State agency, either in person or by phone, before another card is
issued and provide the contact information;
(E) Include a statement that explains what is considered a misuse
or fraudulent use of benefits and the possibility of referral to the
fraud investigation unit for suspicious activity.
(ii) Following notification, should another card be requested, the
State agency may contact the household to request information or
require that the household contact the State agency. Upon the
household's compliance by contacting the State agency as requested, the
household must immediately be issued a replacement card.
(A) The State agency may decline to issue a replacement card if the
household does not respond to the State agency's notice to provide an
explanation for the need to replace the card and the case must be
referred for investigation.
(B) The State agency must educate the client on the proper use of
the card if the explanation is deemed appropriate and the State agency
should not require contact upon subsequent requests, unless the pattern
of card activity has changed since the initial contact and indicates
possible fraudulent activity.
(C) The State agency must refer the household for investigation in
cases where the household contacts the State agency but refuses to
explain the card losses or the explanation provided appears to be
indicative of fraud in accordance with Sec. 273.16 of this chapter.
The State agency must issue a replacement card for any household that
makes the required contact so that the household has access to benefits
in its EBT account while the investigation is underway and while
awaiting a hearing, in accordance with Sec. 273.16(e)(5).
(iii) In all cases, a State agency shall act to protect households
containing homeless persons, elderly or disabled members, victims of
crimes, and other vulnerable persons who may lose electronic benefits
transfer cards but are not committing fraud.
Dated: May 22, 2012.
Audrey Rowe,
Administrator, Food and Nutrition Service.
[FR Doc. 2012-12907 Filed 5-29-12; 8:45 am]
BILLING CODE 3410-30-P