41752 Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations

DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 272 and 273

[Amdt. No. 389]

RIN 0584–AB88

Food Stamp Program: Recipient Claim

Establishment and Collection

Standards

AGENCY: Food and Nutrition Service,

USDA.

ACTION: Final rule.

SUMMARY: Food stamp recipient claims

are established and collected against

households that receive more benefits

than they are entitled to receive. At the

Food and Nutrition Service, we are

revising Food Stamp Program

regulations that cover food stamp

recipient claims. This rule aims to

improve claims management in the

Food Stamp Program while providing

State agencies with increased flexibility

in their efforts to increase claims

collection. We incorporate into this rule

the provisions of the Personal

Responsibility and Work Opportunity

Reconciliation Act of 1996 that affect

recipient claims. In addition, this action

is consistent with the President’s

regulatory reform effort.

The last major revision to the Food

Stamp recipient claim regulations was

in 1983. Recent legislation,

technological advances and changes in

Federal debt management procedures

have made many parts obsolete.

This rule accomplishes several

specific objectives while updating the

Food Stamp recipient claims

regulations. First, it incorporates

changes mandated by the Personal

Responsibility and Work Opportunity

Reconciliation Act of 1996. Second, the

presentation of our policies, and, in

some cases, the policies themselves are

streamlined by this rule. Third, this

action incorporates Federal debt

management regulations and statutory

revisions into recipient claim

management. Finally, this rule provides

State agencies with additional tools to

facilitate the establishment, collection

and disposition of recipient claims.

DATES: Sections 273.18(c)(1)(ii)(B),

273.18(f) and 273.18(g) are effective

retroactive to August 22, 1996. The

remaining amendments of this rule are

effective and must be implemented no

later than August 1, 2000.

FOR FURTHER INFORMATION CONTACT:

Barbara Hallman, Chief, State

Administration Branch, Program

Accountability Division, Food Stamp

Program, Food and Nutrition Service

(FNS), 3101 Park Center Drive, Room

820, Alexandria, Virginia 22302,

telephone (703) 305–2414.

SUPPLEMENTARY INFORMATION:

I. Procedural Matters

Executive Order 12866, Regulatory

Planning and Review

This final rule has been determined to

be economically significant and was

reviewed by the Office of Management

and Budget under Executive Order

12866.

Public Law 104–4

Title II of the Unfunded Mandates

Reform Act of 1995, Public Law 104–4,

(UMRA), 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 UMRA, we

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 us 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 the 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 (FSP) 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 that 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 R. Watkins,

Under Secretary for Food, Nutrition and

Consumer Services, has certified that

this rule will not have a significant

impact on a substantial number of small

entities.

Executive Order 12988

This rule has been reviewed under

Executive Order 12988, Civil Justice

Reform. This rule is intended to have a

preemptive effect with respect to any

State or local laws, regulations, or

policies that conflict with its provisions

or that would otherwise impede its full

implementation. This rule is not

intended to have retroactive effect

unless so specified in the ‘‘Dates’’

section of this preamble. Prior to any

judicial challenge to the provisions of

this rule or the applications of its

provisions, all applicable administrative

procedures must be exhausted.

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

of the regulation describing the agency’s

considerations in terms of the three

categories called for under section

(6)(a)(B) of Executive Order 13132:

Prior Consultation With State Officials

Prior to drafting this final rule, we

received input from State and local

agencies at various times. Since the FSP

is a State administered, federally funded

program, our regional offices have

informal and formal discussions with

State and local officials on an ongoing

basis regarding program implementation

and performance. This arrangement

allows State and local agencies to

provide feedback that forms the basis for

many discretionary decisions in this

and other FSP rules. In addition, we

presented our ideas and received

feedback on current and future claims

policy at various regional, State, and

professional conferences. Lastly, the

comments on the draft rule received

from State and local officials were

carefully considered in the drafting of

this final rule.

Nature of Concerns and the Need To

Issue This Rule

State and local agencies generally

want greater flexibility in their

management of recipient claims. To

maximize efficiency, a State agency

usually tries to integrate, to the fullest

extent possible, its food stamp recipient

claims process with claims operations

for similar programs. State and local

officials have indicated that imposing

requirements unique only to food stamp

claims hampers this consolidation of

effort, thereby leading to inefficiencies.

Extensive prescriptive regulations

already exist for food stamp recipient

Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations 41753

claims. We must change these

regulations to address the concerns of

State and local officials. Addressing

these concerns is a primary objective of

this rule.

Extent to Which We Meet These

Concerns

We believe that we adequately

address the issue of State flexibility in

this final rule. When discretion is

allowed and where appropriate, we

specifically provide State agencies with

the opportunity to develop and use their

own procedures to manage recipient

claims. In addition, we are also willing

to approve a waiver of any discretionary

provision in this rule where a State can

demonstrate that its own procedure

would be more effective and efficient,

providing such a waiver would not

result in a material impairment of any

statutory or regulatory rights of

participants or potential participants

and would otherwise be consistent with

the waiver authority set out at 7 CFR

272.3(c).

Regulatory Impact Analysis

Need for Action

This action is needed to: (1)

Implement changes in food stamp

recipient claims mandated by the

Personal Responsibility and Work

Opportunity Reconciliation Act of 1996,

Pub. L. 104–193, (PRWORA); (2)

incorporate Federal debt management

regulations and statutory revisions into

recipient claim management; (3) provide

State agencies with additional tools for

establishing, collecting and disposing of

recipient claims; and (4) streamline

policies and procedures where

appropriate.

Benefits

The Federal government and State

agencies are the beneficiaries from the

provisions in this rule. The Federal

government will benefit from increased

recipient claims collections brought

about by additional collection tools. In

addition to the added retention amounts

rendered through these increased

collections, State agencies will also

benefit by the streamlined requirements

and procedures in this rule.

Costs

The increased collections brought

about by this rule will reduce Program

costs by $392.5 million for the five year

period fiscal year 2001 through fiscal

year 2005.

II. Paperwork Reduction Act

The information collection

requirements included in this rule have

been approved by the Office of

Management and Budget (OMB) under

OMB Nos. 0584–0069, 0584–0446 and

0584–0492.

Reporting and Record Keeping Burdens

FNS–209 Report (OMB No. 0584–0069)

Claim activity is reported by State

agencies on the Status of Claims Against

Households (FNS–209) report. The OMB

approved the information collection

requirements for completing and

submitting the FNS–209 report under

OMB Control Number 0584–0069. This

rule makes some changes to the form

and reporting requirements. A revised

form FNS–209 and a burden estimate

will be submitted to OMB under the

currently approved OMB Control

Number 0584–0069.

Federal Collection Methods for Food

Stamp Program Recipient Claims (0584–

0446)

The information collection burden for

Federal collections of recipient claims is

covered under OMB Control Number

0584–0446. This rule makes some

changes to those requirements. An

estimate of the revised burden

associated with this collection has

already been approved by OMB.

Repayment Demand and Program

Disqualification (0584–0492)

The burden associated with providing

notice and demand for payment to

households has been approved under

OMB Control Number 0584–0492. This

rule does not change this burden.

Recipient Claims and Other Reporting

Forms Consolidation and Redesign

The proposed rule contained a 60-day

notice proposing to combine and

consolidate the FNS–209 with a number

of other reports. The purpose of this

proposal is to reduce the number of

reports and data elements to be

reported.

We have suspended all work on this

project. Other Federal and State

priorities (especially Year 2000 changes)

have taken precedence. In addition,

postponing this project provides us with

an opportunity to further assess our data

needs and requirements. We will

reannounce our forms consolidation

proposal with a new 60-day notice

when appropriate. All comments

received for the 60-day notice included

in the May 28, 1998, proposed rule will

be taken into account at that time.

III. Background

A. General

Purpose of Rule

This rule creates new standards for

establishing and collecting food stamp

recipient claims. We aim to strike the

optimal balance among various

competing goals including program

integrity, fiscal accountability, practical

claim management, and the rights of

individuals and households. We believe

that this rule achieves this goal.

Plain Language Changes

President Clinton’s memorandum of

June 1, 1998, requires us to write new

regulations in plain language. This final

rule conforms to this requirement. As a

result, the formatting and wording used

in the regulatory text of this rule differs

from the format and text in the proposed

rule. However, unless specifically

addressed in the comment discussion

below, the changes are only in the

presentation of the material and not to

the actual requirements. We believe the

result is a regulation that is both easier

to read and understand.

Overview of Food Stamp Recipient

Claims

The claims environment

Households receiving overpayments

or misusing food stamp benefits

undermine the integrity of the FSP.

Individual overpayments are relatively

small, usually under $500. However, we

estimate that, in fiscal year 1998, over

$1.4 billion in benefits were overpaid in

the aggregate. The efficient and effective

establishment and collection of

recipient claims to collect these

overpayments is essential to program

integrity. Nearly 720,000 claims were

established in fiscal year 1999 totaling

over $307 million.

Although State agencies administer

the FSP and collect overpayments, these

benefits are federally funded and claims

established from overpayments are

Federal debts. This unique arrangement

is the reason why we need extensive

regulations in this area. A strict

application of the standard federal

collection rules is not the best solution

for recipient claim debt management.

The reason for this is two-fold. First, the

Food Stamp Act of 1977, 7 U.S.C. 2011–

2032, (FSA), which governs the FSP,

contains certain collection provisions

and household protections that are not

included in other Federal laws. Second,

we must accommodate State agencies in

their efforts to operate their respective

claims operations as efficiently as

possible. A State agency usually tries to

integrate its food stamp recipient claims

process with claims operations for

similar programs such as Temporary

Assistance for Needy Families (TANF).

To accomplish this, we need to afford

State agencies a certain degree of

flexibility while maintaining enough

41754 Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations

control to ensure effective claims

management.

Claim Types and Establishing Claims

A recipient claim falls into one of

three categories:

1. Intentional program violation (IPV)

claim—This is a claim that is

established because the overpayment

was caused by fraudulent activity by the

household. State agencies are currently

able to retain 35 percent of what they

collect for this type of claim.

2. Inadvertent household error (IHE)

claim—This is a claim that is

established if the overpayment was

caused by the household

unintentionally violating program rules.

State agencies are able to retain 20

percent of what they collect for this type

of claim. They retain a somewhat higher

amount, 35 percent, if the collection is

through unemployment compensation

benefit intercept.

3. Agency error (AE) claim—This is a

claim that is established because the

overpayment was caused by a mistake

on the part of the State or local agency.

State agencies receive no retention for

collecting this type of claim.

State agencies establish a claim by

documenting the amount and reason for

the overpayment, and issuing a demand

letter to the household. Nationwide,

claims establishment for fiscal year 1999

includes:

IPV claim IHE claim AE claim Total

Established

Number ........................ 40,712 ............................... 441,941 ............................. 237,298 ............................. 719,951

Amount ......................... $41.1 million ..................... $212.8 million ................... $53.9 million ..................... $307.8 million

Avg. claim established ........ $1,010 ............................... $481 .................................. $227 .................................. $427

Collecting Claims

State agencies use various methods to

collect claims. The two primary

methods are allotment reduction and

the Federal debt collection programs

such as the Treasury Offset Program:

1. Allotment Reduction—This is

when the household’s benefits are

reduced each month to collect the

claim. Allotment reduction is the

primary collection method for

households that continue to participate

in the FSP.

2. Federal Treasury Offset Program

(TOP)—State agencies refer delinquent

claims to TOP. This is the most effective

collection method for households that

no longer participate in the FSP. TOP

intercepts federal payments that are to

be made to individuals. The sources for

these offsets vary but currently they are

primarily from Federal income tax

refunds and Federal salaries.

3. Other Methods—These include, but

are not limited to, lump sum and

installment payments, wage

garnishments, unemployment

compensation benefit intercepts, and

state income tax refund and lottery

winnings.

This is a breakout by the method of

collection for fiscal year 1999:

Allotment reduction TOP Other methods Total

Amount collected ................. $83.6 million ..................... $85.1 million ..................... $44.3 million ..................... $213.0 million

Of these amounts collected, State

agencies retained about $22.7 million

for IPV collections and about $22.0

million for collecting IHE claims.

Welfare Reform

PRWORA amended the FSA in a

number of ways. This rule implements

the provisions of PRWORA relating to

recipient claims. The specific provisions

were originally addressed in the

proposed rule. We received comments

on the implementation of a number of

these provisions and these comments

are addressed in the following section of

this preamble.

B. Comment Discussion

Publication of Proposed Rule and

Comments

We published the proposed rule, Food

Stamp Recipient Claim Establishment

and Collection Standards, on May 28,

1998, at 63 FR 29303. A total of 96

comment letters were received on this

rule. The letters were from 5 recipient

interest groups, 3 governmental

associations, 40 State agencies, 46 local

agencies (43 from 1 State), and 2 nonFNS Federal agencies. The responses

contained 494 separate comments. We

thank you for your comments and

interest. The final rule is a better rule

because of your recommendations. We

separated the comments by category and

discuss them below.

Recipient Claims as Federal Debts

Food Stamp recipient claims are

State-administered Federal claims. We

included in the proposed rule that these

debts are subject only to this and other

federal regulations governing Federal

debts. We received one comment on this

provision in the proposed rule:

Does this new language in the rule

restrict a State agency’s ability to

manage claims?

One State agency was concerned that

the language specifying that recipient

claims are Federal debts is too strong

and restricts State agencies from

performing claims establishment and

collection more efficiently. It is a legal

fact that these claims are Federal debt

and, as such, they are subject to certain

requirements. However, State agencies

may benefit from this Federal claim

status. For example, our intention with

this provision is to make clear that food

stamp recipient claims are included in

many of the collection authorities and

methods available for other Federal

claims. We do not intend to stifle State

agency flexibility. To make this clear,

we will revise the provision by

removing the word ‘‘only’’ to allow this

flexibility. (See § 273.18(a)(i)(2)). We

also want to remind State agencies that

waivers to these regulations are

available and may be requested. We will

readily approve waivers that serve the

best interest of the FSP by increasing

efficiency and effectiveness in claims

management. Of course, we cannot

approve requests that compromise the

statutory or regulatory rights of

households or are specifically

prohibited by the FSA.

Intentional Program Violations

An intentional Program violation

(IPV) exists when a person is found to

have intentionally violated program

rules. A different section of our

regulations (7 CFR 273.16) covers how

IPVs are determined. We call any

resulting claim an IPV claim. In the

Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations 41755

proposed rule, a claim is handled as an

IPV claim if one of the following occurs:

(1) A court determines that a

household member committed an IPV;

(2) A household member is

determined at an administrative

disqualification hearing (ADH) to have

committed an IPV;

(3) A household member signs a

disqualification consent agreement for a

suspected IPV referred for prosecution;

or

(4) A household member signs a

waiver of his/her right to an ADH.

One change that we made in the

proposed rule (§ 273.18(c) at 63 FR

29325) is to make it optional for State

agencies to establish a suspected IPV

claim as an inadvertent household error

(IHE) claim. We made this proposal to

increase flexibility in this area.

The public submitted several

comments on IPV claims:

Should we provide additional criteria to

determine what claims should be

pursued as IPV claims?

One State agency commented that we

should provide additional criteria to

determine what other occurrences could

be pursued as IPV claims. Another State

agency recommended that we recognize

hearing formats unique to a particular

State agency as acceptable for

determining an IPV and the resulting

IPV claim.

These comments have merit.

However, the recommendations deal

more with IPV determinations rather

than establishing IPV claims. An IPV

claim comes from an IPV. It is the

finding of IPV itself that determines

whether the claim should be pursued as

an IPV claim. To come up with

additional criteria, we need to address

IPV pursuit and determination rather

than IPV claim determination. The

requirements for actual pursuit and

determination of IPVs are not addressed

in the proposed rule or in the

regulations affected by this rule.

Therefore, we will defer these

comments until we propose changes to

the section of our regulations (7 CFR

273.16) that covers IPV pursuit and

determination.

Do we need to add an additional

method for determining an IPV?

One State agency recommended that

we add an additional method for

determining an IPV and the resulting

IPV claim. The State agency requested

that a claim be considered an IPV when

a client enters into a plea bargain or

similar negotiations to avoid being

adjudicated as guilty, but agrees to pay

the debt without admitting guilt.

This situation is already included as

an IPV in our current regulations. State

agencies already have the ability to use

methods described by the commenter to

determine IPVs and establish IPV claims

under the paragraph on deferred

adjudication at 7 CFR 273.16(h) in our

current regulations. Therefore, an

additional method for IPV

determination is not necessary.

Should we have a sub-category for a

suspected IPV?

Instead of providing the option to

establish a pending IPV claim as an IHE

claim, one State agency recommended

that we create a separate sub-category

for pending IPV claims. The State

agency believes that this would alleviate

problems associated with establishing a

claim prior to prosecution. The State

agency’s point is valid and the

suggestion is good. However, we

decided to take a different approach to

resolve issues relating to the claim

referral and establishment process. As a

result, the final rule does not include

many of the claim management

requirements found in the proposed

rule. In the final rule at § 273.18(d),

State agencies may develop their own

claim management plan to deal with

suspected IPVs (as well as other issues).

The Claim Referral and Establishment

section of this preamble provides a more

detailed discussion of this matter.

Why not retain the personal contact

requirement when an IPV is established?

Our current policy at 7 CFR

273.18(d)(2) states that, if possible, a

personal contact shall be made with the

household when beginning collection

action on an IPV claim. We eliminated

this requirement in the proposed rule.

Two recipient interest groups believe

that we should retain this requirement.

The commenters believe that this rule is

beneficial to households by insuring

that recipients have time to plan for

imminent collection activity, and

reduce the likelihood that such

collection activity is taken in error.

We disagree with the commenters’

assertion that this provision provides

added benefits to the household. The

household affected by an IPV claim has

ample opportunity during the hearing

and demand letter process to discuss the

overpayment as well as future collection

action. The retention of this provision is

not necessary and therefore is not

included in the final rule.

Calculating the Amount of the Claim

The proposed rule goes into detail on

how to calculate a claim caused by an

overpayment. The final rule at

§ 273.18(c) provides this information in

a user-friendly table. We received

several comments on calculating claim

amounts:

Should any underpayments be applied

to reduce an overpayment when

determining the amount of a claim?

One recipient interest group

recommended that all household

circumstances should be included when

establishing a claim. This includes

applying any underpayment occurring

because of the change in household

circumstances against the overissuance

with the difference being the claim. The

commenter further believes that fairness

dictates that this should be done even

for periods beyond those for which an

underpayment can be restored. The

limit for the restoration of benefits is

currently one year prior to when the

State agency discovers the

underpayment.

We believe that the proposed and

final rule adequately cover this

situation. When a claim is calculated,

the State agency determines the correct

amount of food stamp benefits for the

months in question. This covers

circumstances directly relating to the

cause of the claim that cause

underpayments as well as

overpayments. For example, assume an

additional household member with

earned income joins the household. In

this case, the additional income would

cause an overpayment. Conversely, an

additional household member with no

income would cause an underpayment.

The additional income would be offset

(to some extent) by the larger household

size in determining the amount of the

claim. For periods in which there are

net monthly underpayments, they may

be offset against any resulting claim.

The only situation that is not covered

by the final rule is when the

underpayment happened more than one

year before the State agency learned

about it. In this instance, the State

agency may not use the underpayment

to offset an overpayment when

calculating a claim. While we recognize

that this may not appear fair to the

household, this is the law. Section

11(e)(11) of the FSA (7 U.S.C.

2020(e)(11)) does not allow restoring

benefits that are greater than one year

old.

We want to make one final point

regarding claims calculation. When

calculating a claim, a State agency is

expected to only use new data that it

becomes aware of due to circumstances

regarding the claim. A State agency is

not required to re-verify all factors

pertaining to the household.

41756 Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations

Why are we not allowing the earned

income deduction when calculating IHE

claims?

We proposed to not allow the 20

percent earned income deduction to that

part of any earned income that the

household failed to report timely. One

State agency objected to this proposed

policy change. The commenter argued

that, since the household inadvertently

made the mistake, we should not further

penalize the household. The State

agency also argued that our proposal

would conflict with its TANF policy.

While the commenter does make some

valid points, we have no choice in this

matter. This rule change is set by

legislation. Section 809 of the PRWORA,

by amending section 5 of the FSA (7

U.S.C. 2014), specifically prohibits the

inclusion of the 20 percent earned

income deduction for these types of

claims. As a result, this provision

remains as proposed in the final rule.

(See § 273.18(c)(1)(ii)).

Claims for Recipient Trafficking

The proposed rule would provide

State agencies with the authority to

establish recipient claims for trafficking.

The public submitted 41 comments on

this proposal. State and local agencies

generally supported this proposal with

some agencies expressing minor

concerns or requesting clarifications.

However, several recipient interest

groups, along with a few State agencies,

questioned the legality as well as the

propriety of this proposal.

Are trafficking claims legal and

appropriate?

Five commenters disagreed with our

assertion in the proposed rule that the

FSA allows us to authorize State

agencies to establish claims for

trafficking. The commenters contend

that the FSA only provides for claims

due to an actual overpayment and that

we have no authority to develop new

principles for when a debt is owed. We

concur with the commenters that,

generally, an overpayment occurs when

a household receives more benefits than

the household is entitled to receive.

However, we still believe that we are

able to extend claim establishment

authority to instances of trafficking and

benefit misuse. Section 13(a)(1) of the

FSA (7 U.S.C. 2022(a)(1)) allows us to

provide State agencies with ‘‘ * * * the

power to determine the amount of

* * * any claim * * * including, but

not limited to, claims arising from * * *

overissuances to recipients * * *

(emphasis added).’’ The ‘‘not limited to’’

language shows that Congress did not

intend to specifically limit this

authority to overpayments caused by

certification and issuance errors.

Moreover, Congress directed us to issue

such regulations as are necessary or

appropriate for the effective and

efficient administration of the FSP so

long as the regulations are consistent

with the FSA, 7 U.S.C. 20139(c). Since

the misuse of FSP benefits is clearly

inconsistent with the purposes of the

Program, and the establishment of

claims can deter the misuse of benefits

and allow for recovery of such benefits,

we believe the establishment of claims

for trafficking against recipients is

within our authority. Considering this,

our proposed provision is authorized by

the FSA and therefore remains in this

final rule.

Why are all household members, and

not just the trafficker, responsible for

paying a trafficking claim?

The proposed policy states that all

adult household members are jointly

and separately responsible for the

payment of claims. One commenter

remarked that only the trafficker should

be responsible for a trafficking claim

rather than all adult household

members. The commenter points out

that each adult in a household cannot

reasonably be expected to be present or

even aware each time someone in the

household transacts the benefits.

Therefore, according to the commenter,

a responsible adult household member

would often have no means of being

aware of, much less preventing, the

trafficking. While this is a valid point in

some cases, we believe that, in most

instances, responsible household

members are able to control the use of

their benefits. First, when the State

agency initially issues the electronic

benefits transfer (EBT) card, a

household undergoes an orientation or

receives written training materials on

the proper uses of the card. Second, we

have no reason to believe that

responsible household members are not

savvy enough to recognize when the

benefits are not properly being used.

Finally, EBT cards contain personal

identification numbers to specifically

limit who has access to benefits. For

these reasons, we believe that it is

appropriate to hold all adult household

members jointly and severally liable for

a trafficking claim.

Should a State agency set up a claim

against the household when a

household member did not conduct the

improper transaction?

Two commenters assert that

trafficking claims may be inappropriate

because EBT transaction printouts (that

form the basis for most of the EBTrelated claims) do not identify who

actually used the EBT card in the

improper transaction. As an example,

the commenters state that a disabled or

temporarily incapacitated person may

ask a friend, neighbor, or family member

to purchase food. The disabled person

would have no way of controlling what

these ‘‘helpers’’ do with the benefits. In

general, recipients are responsible for

preventing benefit misuse by others.

However, we agree with the commenters

that these instances may in fact occur.

Where good cause, such as the

household being taken advantage of by

an authorized representative, can be

established then there should be no

trafficking claim. The State agency may

then, with the household’s assistance,

pursue the trafficking violation against

the individual who inappropriately

used the household’s benefits. (See

§ 273.18(a)(4)(iii).)

Shouldn’t this proposal be used only for

more serious forms of trafficking?

One State agency commented that the

proposal is too severe and it should only

be used for some instances of

trafficking. The commenter continues by

stating that an otherwise responsible

household may try to redeem benefits

for other than food items due to some

emergency. While we recognize that

some forms of trafficking may be less

objectionable than others, we still must

disagree with this comment. With rare

exception, the FSA (7 U.S.C. 2013(a))

and longstanding policy is clear in not

allowing FSP benefits to be used for

anything other than food.

Compromising on this policy in this

instance would undermine the basis for

the FSP itself.

How will this proposal deter trafficking?

One recipient interest group

commented that implementing this

proposal is unlikely to deter future

traffickers. The commenter’s reasoning

is that the increase in the penalty that

this rule would make is quite small in

comparison to the other penalties that

already exist for trafficking. Existing

penalties include program

disqualification and, for more grievous

offenses, fines and imprisonment.

According to the commenter, adding

this relatively small penalty with these

larger penalties already in place, will

have no effect to deter future trafficking.

We would first point out that the

proposal was not intended to establish

a penalty but to authorize claims to

recover the value of misused benefits,

which could also have a deterrent effect.

While we are unable to estimate the

magnitude of this deterrent effect, at a

minimum, authorizing claims for

Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations 41757

trafficking allows us to recover misused

FSP benefits. Furthermore, our proposal

is an integral part of a comprehensive

effort to deter trafficking and, as such,

this approach, including all of the

applicable penalties, must be looked

upon in its entirety. For this reason, the

proposal will remain in the final rule.

Why establish a recipient claim when

the retailer, rather than the household,

‘‘profits’’ from a trafficking transaction?

One State agency strongly objected to

this proposal because it believes that it

is the retailer, and not the recipient, that

profits from a trafficking transaction.

The retailer profits by providing cash at

a discounted rate (usually 50–60

percent) for benefits. As a result, the

household almost certainly realizes a

reduced value from the benefits. The

commenter believes that, since the

transaction benefits the retailer, it is the

retailer, rather than the household that

should bear more of the burden for this

responsibility.

Trafficking requires both a retailer

and a recipient. Severe penalties are

already in place for retailers and we are

constantly looking for ways, both

legislatively and administratively, to

further strengthen our efforts against

irresponsible retailers. Until now,

program disqualifications have been the

only recourse against recipients who

traffick. We believe that this is not

enough. Authorizing State agencies to

establish a claim against recipient

traffickers provides an additional

disincentive for those recipients who

do, in fact, traffick.

We also disagree with the

commenter’s contention that State

agencies should not additionally punish

recipients because they are not

‘‘profiting’’ from trafficking transactions.

We concur with the commenter that a

trafficking household is making an

unprofitable transaction from a purely

financial point of view. However,

whether the trafficking household

actually ‘‘profits’’ should not be an

issue. Fraud and abuse that threatens

program integrity is the basis for this

provision. Evidently, in their view,

recipients profit from these transactions

since it provides them with additional

cash or material goods.

Can collections be made against both

the retailer and the household for the

same amount trafficked?

In the preamble to the proposed rule

(63 FR 29307) we addressed the fact that

there is no correlation between retailer

fines and recipient trafficking claims.

Retailer fines provide for monetary

penalties significantly larger than the

amount trafficked. In these instances

both the retailer fine and recipient claim

can be independently collected with no

coordination necessary between the two

categories of debt. However, in addition

to these larger penalties, we are moving

towards administratively establishing

claims against retailers for the amount

trafficked. Since both this action and

recipient trafficking claims directly

correspond to the amount trafficked, we

must take into account the False Claims

Act (31 U.S.C. 3729–3731). The False

Claim Act (31 U.S.C. 3729–3731) does

not allow a collection to exceed the total

amount lost. We are currently looking at

ways to make it administratively

feasible to collect from both the

recipient and the retailer while ensuring

that total collections will not exceed

total amount lost. For the purposes of

this rule, however, no change is

necessary.

Can this provision result in a household

actually owing more than the household

is issued?

Two commenters stated that this

proposal may result in households

owing more benefits than were actually

issued. This would occur when a

household receives an overissuance and

then trafficks those benefits. In this

scenario, the household would

essentially repay double the original

benefit issued. We agree with the

commenter that this is possible.

However, we do not believe that this

warrants not allowing recipient

trafficking claims in these instances.

Trafficking is independent of the

issuance or certification process and

therefore any corresponding claims

assessed by the State agency are

unrelated. In addition, we have a

longstanding policy that an individual

may receive more than one IPV for

violating two or more unrelated program

rules (such as change reporting and

trafficking) during the same time period.

This same policy is being extended to

recipient trafficking claims.

Is this proposal considered an unfunded

mandate and will additional funding be

made available?

We received seven comments on the

added workload imposed by this

proposal and whether additional

funding or training will be made

available. Three commenters consider

this proposal an unfunded mandate.

Two commenters added that the pursuit

of traffickers should be solely a federal

responsibility.

The purpose of this proposal is to

supplement our existing policy

regarding the pursuit of recipient

trafficking. State agencies have always

been required to pursue any IPV,

including recipient trafficking. This is

not new policy and this rule is not

introducing new policy regarding

additional IPV pursuit. Therefore, this is

not an unfunded mandate. The purpose

of this proposal is simply to authorize

State agencies to establish claims

against traffickers that are already being

pursued. In many of these instances, the

amount trafficked has already been

determined. As such, the added costs to

establish these claims are minimal.

Establishing claims for trafficking

allows State agencies to recover more of

the costs associated with the pursuit of

fraud. Currently, when a State agency

pursues an IPV against a trafficker, the

agency receives nothing more than the

normal administrative match. Pursuing

claims against these traffickers allows

the State agency to retain 35 percent of

collections for IPVs with minimal

additional establishment costs.

As discussed above, the pursuit,

prosecution and determination of IPV

against recipients who traffic is not new

policy. However, we do recognize that,

with the advent of EBT (that provides

States with the ability to identify

potential traffickers), this is a relatively

new area for some State agencies. We

also recognize that, since this is a new

area, some State agencies may be

pressed to allocate additional resources.

Because of these concerns, we are taking

the opportunity in this preamble to

address this issue. Obviously, State

agencies are not expected to ‘‘catch’’

and subsequently pursue every single

questionable EBT transaction. However,

State agencies are to pursue potential

recipient trafficking incidents referred

by us. In addition, while a State may

pursue any other trafficking offense,

State agencies should prioritize their

efforts and concentrate on those

trafficking incidents that are more

egregious. These include those of a

repeated nature that contain high dollar

amounts. In addition, States should also

concentrate their efforts on incidents

that include trafficking for controlled

substances, firearms and similar. States

agencies are encouraged to set pursuit

and prosecutorial standards and dollar

thresholds to ensure that their recipient

trafficking program is targeted towards

these areas. This will result in enhanced

program integrity as well as a recipient

trafficking pursuit process that is both

effective and efficient.

What is considered trafficking?

Three commenters requested

clarification on what specifically is

considered trafficking. To accommodate

this request, we will cross reference the

text in this final rule at § 273.18(a)(1)(ii)

41758 Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations

with our standard definition found in 7

CFR 271.2 of our regulations.

How should we, as State agencies,

calculate trafficking claims?

The proposed rule stated that the

amount of a trafficking claim would be

the value of the trafficked benefits as

determined by the individual’s

admission, adjudication, or the

documentation that forms the basis for

the trafficking determination.

One State agency asked whether the

claim would be the amount of food

stamp benefits that the client expended

in the trafficking transaction or the

amount of cash the individual realized

as a result of the trafficking transaction.

The claim would always be for the

amount of the food stamp benefits since

that was the amount of benefits lost

because of the illegal transaction.

Are EBT documentation records

sufficient for determining the amount of

the claim?

We received one comment stating that

EBT transaction records are not

sufficient to determine the amount of

the claim. In addition, two State

agencies commented that, since many

times we alert the State agency of the

trafficking offense, we should also

develop the information to document

the fact of trafficking and the claim

amount. We disagree that this is a

Federal responsibility. Although, at

times, we will provide State agencies a

good deal of information on specific

recipient trafficking incidents, several

State agencies have pointed out in

comments and at public forums that

EBT transaction documentation is a

clear indicator of the amount trafficked.

These agencies further emphasize that

they can easily convert these amounts

into the corresponding claim. We are

always willing to provide technical

assistance upon request to State

agencies in this area.

Should we have an inadvertent benefit

misuse (Non-IPV trafficking) claim?

The proposed rule includes a

provision that allows State agencies to

establish ‘‘inadvertent’’ benefit misuse

claims against households. State

agencies may use this authority in

trafficking situations that do not warrant

IPV determinations. Three commenters

requested more clarification and

guidance for this proposal. One

commenter disagreed with this proposal

and contended that any misuse of

benefits is intentional.

The provision was originally

proposed to maximize State agency

flexibility in this area. However, upon

further examination, we do not believe

that it is appropriate for State agencies

to establish a benefit misuse claim

against those households that have not

been found to have trafficked. Our

purpose in authorizing this type of

claim is to deter trafficking. Allowing

‘‘inadvertent benefit misuse’’ claims for

unintentional offenses does little to

contribute to this goal. Therefore, the

final rule does not authorize a State

agency to establish a benefit misuse or

trafficking claim against a household

unless there is an actual determination

of IPV. (See § 273.18(a)).

Claim Referral and Establishment

We proposed many changes to

improve the management and

establishment of claim referrals. A claim

referral is the identification of a

potential overpayment that needs to be

investigated and established as a claim.

The current regulations provide no

guidance on managing suspected

overpayments and claim referrals. As a

result, some State agencies were either

not establishing claims or they were not

developing or enforcing internal time

frames, thereby causing a backlog of

claim referrals. When a backlog exists,

claims are not timely established.

Claims that are established timely stand

a better chance of being collected.

To address this situation, we

proposed standards for claim

establishment. The proposed standards

included the following:

(1) Defining the discovery and

establishment dates for claims;

(2) Requiring the tracking of claim

referrals;

(3) Establishing the end of the quarter

following the quarter of discovery as the

time frame for claim establishment; and

(4) Defining that a backlog exists

when over 10 percent of referrals do not

meet the establishment time frame.

We received 129 comments from 77

commenters on this proposal. Only four

comments supported some aspect of our

proposal. The remaining 125 comments

generally indicated that we are

interfering too much with State-specific

processes. These processes are unique

and cross program and organizational

boundaries. Changing these procedures

and processes to conform to our specific

rules would cause inefficiencies within

State agencies that would be contrary to

the spirit of this rule.

Our primary purpose in proposing

these changes was to improve claim

referral management. However, the

comments received clearly show that

flexibility is needed in this area.

Therefore, in the final rule, we include

an optional provision to improve claim

referral management that addresses this

need for flexibility. This new procedure

reflects the collective view of the

comments that State agencies can better

manage claim referrals if States have

latitude to tailor the management of

claims establishment and collection to

local situations.

The final rule retains the proposed

standard for establishing claims.

However, in lieu of using this standard,

we are allowing State agencies to

develop and follow their own standards

and procedures subject to our approval

(see § 273.18(d)). At a minimum, this

procedure, known as a State claim

referral management plan, must include

the following:

State Claim Referral Management Plan

Minimum Requirements

(1) Justification as to why your

standards and procedures will be more

efficient and effective than our claim

referral standard.

(2) Procedures for the detection and

referral of potential overpayments or

trafficking violations.

(3) Time frames and procedures for

tracking regular claim referrals through

date of discovery to date of

establishment.

(4) A description of the process to

ensure that these time frames will be

met.

(5) Any special procedures and time

frames for IPV claim referrals.

(6) A procedure to track and followup on IPV claim referrals when they are

referred for prosecutorial or similar

action.

This plan will be subject to our

approval. We will approve any plan that

demonstrates that procedures are in

place to ensure that claim referrals are

acted on in an effective and efficient

manner. In addition, we will provide

assistance to those State agencies who

need help in developing a plan. A State

agency will maintain maximum

flexibility in this area, provided it is

following its plan and managing claim

referrals efficiently. We do reserve the

right, however, to step in and impose

requirements as part of a corrective

action plan if a State agency is not

performing this function in an efficient

and effective manner.

Our goal, as described above, is to

ensure efficient and effective claims

referral management while maximizing

State agency flexibility. Allowing State

agencies to develop their own plan

maximizes this flexibility. However, we

need to ensure that the State agency’s

plan results in overall effective and

efficient claims management. For this,

we believe the best measure is claims

collections. A high rate of collection is

indicative of a high level of efficiency

and effectiveness throughout the claims

Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations 41759

process. We will therefore assess State

agencies performance by comparing

collections with overpayment rates in a

State. State agencies whose collections

are low compared to past and current

national levels will be required to

develop a corrective action plan to

address any deficiencies. (See

§ 273.18(a)(3)).

Claims Threshold and CostEffectiveness Policy

A claims threshold is the

overpayment dollar amount under

which State agencies do not need to

pursue a particular overpayment. We

currently have a $35 claims threshold.

This current threshold applies only to

non-participating households with nonIPV overpayments. We proposed many

changes in the May 28, 1998 rule:

PROPOSED THRESHOLD AND COST-EFFECTIVENESS DETERMINATION POLICY FOR STATE AGENCIES

You May Follow Your Own Cost Effectiveness Plan and

opt not to establish any claim if . . . Unless . . . or . . .

you determine that the claim referral is not cost

effective to pursue.

you do not have a cost-effectiveness plan approved by us.you have already established the claim.

Or You May Follow the FNS Threshold and

opt not to establish any claim if . . . Unless . . . or . . .

You determine that the claim referral is $125 or

less.

the household is participating in the FSP ........ you have already established the claim.

We received 24 comments on this

comprehensive proposal. Seven

commenters specifically supported our

proposal to allow State agencies to

develop and use their own costeffectiveness plan. We derived the

following questions from the other

comments:

Why not retain the original $35 FNS

threshold for IHE claim referrals?

One State agency supported retaining

the old $35 threshold for IHE claim

referrals. As discussed in the proposed

rule (63 FR 29308), we believe that the

$35 benchmark is outdated and does not

accurately reflect State establishment

and collection costs. We continue to

believe that the $35 benchmark needs to

be updated. We are therefore retaining

the proposed $125 threshold amount in

the final rule. (See § 273.18(e)(2).)

However, the use of this maximum

threshold is optional. The final rule

does not prevent any State agency from

establishing any claim for an amount

lower than the $125 threshold. In other

words, the State agency submitting this

comment is free to establish any claim,

regardless of the amount.

Why do we extend the FNS threshold to

include IPV claim referrals?

The proposed threshold included IPV

referrals. Three commenters believe that

the threshold should not include IPV

referrals. They believe that it is

inappropriate because the overissuance

is caused by an individual intentionally

breaking program rules. The severity of

the offense, according to the

commenters, dictates that a claim be

established and pursued.

We recognize the commenters’

concerns. However, we still believe that

this policy should remain a State agency

option. The goal of this rule is to

maximize flexibility. Even though the

overpayment was intentional, there may

be instances in which it is in the best

interest of the FSP for a State agency not

to pursue the resulting IPV claim

because of the relatively low dollar

amount. This final rule retains this

flexibility. (See § 273.18(e)(2).)

Should participating households be

excluded from the FNS threshold?

The proposed rule excludes

participating households from the

threshold. The reasoning behind this is

that these claims may be recovered by

reducing the household’s allotment. Six

commenters believe this exclusion is

unfair and impractical. It is unfair,

according to the commenters, because

the poorest households, those still

participating in the Program, need to

repay every overpayment. On the other

hand, those not participating and

generally more well-off, are not charged

with repaying smaller overpayments.

The commenters also argued that the

proposal is impractical because of the

dynamic nature of the FSP. Since

households move on and off the FSP,

State agencies are unable to accurately

assess which households are actually no

longer participating in the FSP.

We recognize the difficulties

associated with limiting this threshold

to non-participating households.

However, allotment reduction is a

readily available collection method for

participating households. We believe

that program integrity would suffer if a

relatively large number of overpayments

that are easily recoverable are routinely

not pursued. In addition, the costs

associated with allotment reduction are

relatively small. Therefore, we are not

extending the FNS threshold to include

participating households. (See

§ 273.18(e)(2)). However, to maximize

flexibility, we would consider

appropriate a threshold for participating

households that is lower than the

threshold for non-participating

households. State agencies may include

such a two-tier threshold when it

submits its own cost effectiveness plan

for our approval.

Why don’t we increase the amount of

the FNS threshold to equal the highest

amount allowed through waivers?

So far we have approved cost

effectiveness waivers for up to $250 for

non-participating households. One State

agency recommended that we increase

our FNS threshold from the proposed

$125 to the highest amount ($250)

currently approved through waivers.

The commenter stated that a review of

the currently approved waivers

demonstrates that the $125 threshold is

too low. We do recognize that a number

of State agencies incur costs

significantly above the $125 threshold.

However, we purposely set this

threshold lower to ensure that prudent

claims management is maintained

among those States that incur relatively

low claim establishment and collection

costs. States with higher costs are free

to develop their own methodology. The

$125 FNS threshold in the proposed

rule remains. (See § 273.18(e)(2)).

What is meant by not applying the FNS

threshold to already established claims?

In the proposed rule, the FNS

threshold does not apply to already

established claims. One State agency

asked for clarification. The $125 FNS

threshold covers the combined costs of

establishing and collecting the claim.

41760 Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations

The threshold no longer applies once

the claim is established. Disposing of an

already established claim because it is

not cost effective to collect is discussed

in the Terminating Claims section of

this preamble.

Shouldn’t the FNS threshold

automatically increase with inflation?

The proposed FNS threshold is fixed

at $125. One commenter recommended

that the threshold automatically

increase with inflation. The commenter

makes a valid point. However, we are

reluctant to include this in the final rule

because we are unsure if we should tie

claim establishment and collection costs

directly to inflation. Advances in

automation and the introduction of

other efficiencies may actually bring

down establishment and collection costs

in the future. The threshold remains

fixed in the final rule (See

§ 273.18(e)(2)).

Isn’t the FNS threshold unfair to larger

households?

Two commenters suggested that the

claims threshold take into account both

the monthly amount and duration of the

overpayment. They felt it was unfair

that a larger household can easily have

an overpayment well over $125 in just

one month, while a smaller household,

that receives a smaller issuance, can

have an overissuance that extends

several months, but does not total over

$125. The commenters felt that

overpayments of short duration should

not be pursued. The real problem is

ongoing overpayments. The commenters

suggested that a claim must both exceed

$125 in total and represent

overpayments continuing for more than

three months.

We recognize that a larger household,

on average, would have a larger claim

than a smaller household. However,

basing a threshold both on duration and

amount systematically excludes large

overpayments from collection and

removes an incentive for households to

report changes timely. We do not

believe that this is good claims

management. The rule remains

unchanged.

Will having different thresholds for

some State agencies result in unequal

treatment for households?

State agencies have the option in the

proposed rule to develop their own costeffectiveness procedures. One

commenter is concerned that this may

result in unequal treatment to

households across State lines. Unequal

thresholds are certain to happen under

this rule. However, State agencies have

been working with different thresholds

based on waivers for many years.

Providing this flexibility provides State

agencies with an important claims

management tool. The fact that some

will escape payment does not change

the fact that all collections are from

those who previously received

overpayments. This proposal will

remain in the final rule. (See

§ 273.18(e)(2)).

Will State agencies receive guidance to

determine their own cost-effectiveness

provisions?

Some State agencies requested

technical assistance to develop their

cost-effectiveness provisions. We are

developing broad guidelines based on

prior waiver submissions. You may

contact your regional office to obtain

these guidelines as well as to receive

other technical assistance in this area.

What is meant by ‘‘jurisdiction’’ in the

preamble of the proposed rule?

The preamble of the proposed rule (63

FR 29309) states that ‘‘. . . no

jurisdiction would be prevented from

establishing and/or pursuing the

collection of any claim that falls under

the threshold.’’ One State agency asked

whether a ‘‘jurisdiction’’ meant a region,

state or a county. The answer is State

agency. However, our intent in this

passage is not to dictate any further

requirements or limitations. The intent

is simply to provide that it is up to each

State agency to decide how it wishes to

use the threshold. We have no problem

with State agencies delegating this

authority to counties or other local

agencies.

How can we be sure that any

overissuance has a chance to be

developed into a claim?

We are concerned that any claims

threshold not create an incentive for

households to obtain overpayments

below the threshold with impunity. To

address this concern, we include in the

final rule the stipulation that a claim

must be pursued for any overpayment

discovered through the quality control

system. This ensures the chance that

any overpayment, regardless of size,

may be subject to establishment and

collection. (See § 273.18(e)(2)).

In summary, what changes regarding

this proposal are incorporated into the

final rule?

There is only one change in threshold

and cost-effectiveness determination

policy from the proposed rule. That

change is that a claim must be pursued

if the overpayment is discovered in a

quality control review.

Notification of Claim

The proposed rule contains several

new requirements regarding

notification. These requirements

affected either the food stamp

application or the initial demand letter.

We received 28 comments regarding the

new and existing requirements.

Why must we add language to the

application form concerning the use of

the social security numbers to pursue

claims?

Six State agencies and one recipient

interest group commented that it is

more appropriate to include this

information in the demand letter rather

than the application form. The recipient

interest group commented that the

language appeared intimidating and

may actually discourage participation in

the program.

The purpose of this language is not to

be intimidating but rather to inform

recipients how their social security

number may be used. This notification

is required by the Privacy Act of 1974

(5 U.S.C. 552a, note 2) and the Debt

Collection Act of 1982 (31 U.S.C.

3716(a)). As a result, we have no choice

but to include this notification in the

final rule. However, we are simplifying

the language to make it appear less

intimidating. (See § 273.2(b)(4)).

One State agency asked why we

include that claims ‘‘may be referred

* * * to the Department of Justice (DOJ)

for litigation’’ in the language to be

included in the application form. We

proposed to add this language because,

since food stamp claims are Federal

claims, they may, in fact, be referred to

DOJ. However, because recipient claims

are usually for relatively small amounts,

referral to DOJ would be extremely rare.

Therefore, we are not including this

requirement in the final rule.

Does the household need to have

actually received the notice for the

notice requirements to have been met?

Three recipient interest groups and

two State agencies submitted comments

concerning whether the household

actually needs to receive the notice. The

State agencies requested clarification as

we do not address this specific area in

the proposed rule. The recipient groups

want to ensure that the household does,

in fact, receive the notice. These

comments are connected to the fact that

we deleted a provision in the existing

rule at 7 CFR 273.18(d)(1)(i)(B) that

allowed State agencies not to pursue a

claim if the household cannot be

located.

We believe sending the notice via first

class mail is an efficient and reliable

Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations 41761

method to deliver demand letters. If the

mail is not returned by the Postal

Service, the State agency can assume

that the household received the notice.

The State agency may then proceed with

collection action.

If the mail is returned, then obviously

the household did not receive the

notice. Under the existing regulations,

the State agency did not need to further

pursue this claim. The proposed rule

eliminated this option. Considering the

comments received above, we are

reinstating this option in the final rule.

State agencies may (but are not required

to) terminate the claim if the household

cannot be located. (See § 273.18(e)(8)).

Are State agencies allowed to send the

demand letter and notice of adverse

action (NOAA) separately?

The proposed rule requires the State

agency to provide the household with a

NOAA ‘‘as part of or along with’’ the

initial demand letter/claim notification.

Two commenters stated that they send

the NOAA separate from the demand

letter. The NOAA is sent subsequent to

the demand letter, when it is

determined what ‘‘adverse action’’ will

take place.

In our proposal, we did not intend to

require that the NOAA accompany the

demand letter. However, in looking at

the proposed language, we see how it

could be interpreted in that way.

Therefore, we are changing this

language in the final rule to clear up this

confusion. (See § 273.18(e)(3)(iii)).

Should the household be advised in the

demand letter that the State agency can

compromise the household’s claim?

Two recipient interest groups

commented that the State agency needs

to notify the household that the State

may be able to compromise its claim.

The groups cite a recent court case,

Bliek v. Palmer, 102 F. 3d 1472 (8th Cir.

1997). In Bliek, the court ruled that the

failure to properly advise a household of

the agency’s compromise authority

violates the household’s due process

rights.

While we do not agree with the court

decision that we were violating the due

process rights of the household, we do

recognize the benefits of including this

language in the demand letter.

Therefore, we are including language for

the demand letter specifying that the

State agency may compromise a claim

in the demand letter requirements. (See

§ 278.18(e)(3)(iv)(M)).

Don’t we need more information in the

demand letter in addition to informing

the household of the ‘‘type’’ of claim?

One recipient interest group

commented that it is unclear as to what

we mean when we require that the

household must be informed of the type

of overpayment. Our intention is that

the household would be informed of the

reason for the overpayment and time

period involved. This also includes

whether it is an IPV, IHE or AE claim

as well as a brief explanation (such as

unreported income, etc.). We make this

intention clear in the final rule at

§ 273.18(e)(3)(iv).

We also received two comments

stating that the demand letter needs to

show how the claim was calculated. We

agree and will include this as a

requirement in the final rule. (See

§ 273.18(e)(3)(iv)(E)).

Must the demand letter contain a due

date?

The purpose of including the due date

in the demand letter is to determine

delinquency. We received two

comments on the proposed requirement

to include a due date in the demand

letter. One State agency asked whether

a specific date is needed or if language

such as ‘‘30 days from the date of this

letter’’ is sufficient. The commenter

believed that a specific date is not

needed since: (1) It is clear to the

household when payment or a response

is due and (2) the State agency would

still be able to determine delinquency

status. We agree. The second commenter

believed that including a due date

would confuse participating

households. The due date is irrelevant

for these households because they are

about to have their benefits

automatically reduced to pay off the

claim. Again, we agree. However, any

subsequent notification to the

household once it leaves the program

must include a due date. The final rule

reflects this change. (See

§ 273.18(e)(3)(iv)(N)).

Can a State agency continue to provide

participating households with the

choice of how to repay the claim?

The proposed rule requires State

agencies to automatically collect any

claim from a participating household

through allotment reduction. One State

agency asked whether they could still

give a participating household a choice

in the demand letter of how to pay the

claim.

We believe that allotment reduction is

by far the most efficient way to collect

a claim. However, to maintain the spirit

of this rule, we do not object if a State

agency wishes to give the household

other options. The only requirement is

that the household pay off the claim at

the same or higher level of the amount

that would have been collected through

allotment reduction. This is reflected in

the final rule at § 273.18(e)(3)(iv) and

§ 273.18(g)(i).

What exactly needs to be included in

the initial demand letter/claim

notification?

Two recipient interest groups

commented that we should spell out

exactly what needs to be in the demand

letter. We agree. The following table

lists what needs to be in the demand

letter. The changes discussed above are

included in this listing and at

§ 273.18(e)(3)(iv) in the final rule:

The initial demand letter or NOAA

must include . . .

(1) The amount of the claim.

(2) The intent to collect from all

adults in the household when the

overpayment occurred.

(3) The type (IPV, IHE, AE or similar

language) and reason for the claim.

(4) The time period associated with

the claim.

(5) How the claim was calculated.

(6) The phone number to call for more

information about the claim

(7) That, if the claim is not paid, it

will be sent to other collection agencies,

who will use various collection methods

to collect the claim.

(8) The opportunity to inspect and

copy records related to the claim.

(9) Unless the amount of the claim

was established at a hearing, the

opportunity for a fair hearing on the

decision related to the claim

(10) That, if not paid, the claim will

be referred to the Federal government

for federal collection action.

(11) That the household can make a

written agreement to repay the amount

of the claim prior to it being referred for

Federal collection action.

(12) That, if the claim becomes

delinquent, the household may be

subject to additional processing charges.

(13) That the State agency may reduce

any part of the claim if the agency

believes that the household is not able

to repay the claim.

(14) A due date to either repay or

make arrangements to repay the claim,

unless the State agency is to impose

allotment reduction

(15) If allotment reduction is to be

imposed, the percentage to be used and

the effective date.

Claims and Fair Hearings

Households have 90 days to request a

fair hearing if they believe that some

41762 Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations

part of the claim is incorrect. Several

comments were received on the

interaction between fair hearings and

claims.

What must the State agency include in

the demand letter/repayment notice

sent following a fair hearing decision?

In the proposed rule, when a hearing

decision is rendered sustaining an

overpayment, the State agency must

send a second demand letter to the

household. Three State agencies

questioned the need for such a letter as

the household already received the

original letter.

It was not our intention to have the

post-fair hearing demand letter be the

same as the original demand letter.

However, we still believe that some type

of notice is necessary. The post-fair

hearing demand notice only needs to be

a statement saying that the household

still owes the claim and what will be the

next step (i.e., allotment reduction or

demand for payment). The date of

delinquency will be based on the time

period provided in this notice. This

clarification is reflected in the final rule

at § 273.18(e)(6)(ii).

In addition, one local agency asked

whether the household can request a

fair hearing based on this notice. The

answer is no. Since the amount of the

claim has already been sustained at a

hearing, a second hearing on the same

issue is not an option.

Does collection action really need to

stop when a fair hearing is requested?

In the proposed rule, all collection

actions would stop if a fair hearing is

requested. Five State agencies disagreed

with this proposal. The commenters

stated that this procedure would result

in collection delays of several months.

We recognize the commenters’

concerns. However, we believe that the

rights of households supersede these

concerns. For this reason, our policy to

cease collection action when a fair

hearing is requested will remain in the

final rule.

Delinquency

Referring appropriate claims for TOP

and other Treasury reporting

requirements make it necessary for us to

determine when a claim initially

becomes delinquent. In the proposed

rule, a claim becomes delinquent if no

response or payment is received by the

due date in either the demand letter or

repayment agreement. A claim remains

delinquent until payment is received in

full, a satisfactory payment agreement is

negotiated, or allotment reduction is

invoked. We received six comments

specifically supporting this definition.

We received an additional four

comments concerning the applicability

of this definition.

Can claims handled through the court

ever be considered delinquent?

The proposed rule stated that a claim

may not be considered delinquent if

collection is coordinated through the

court system and the State agency has

limited control over the collection

action. One State agency commented

that we should not make an exception

for claims paid through the court. We

are not making an overall exception in

this case. Our intent is simply to

accommodate situations that are unique

to some States. In these situations, the

State agency has limited contact with

the court and is not always able to

accurately determine the status of the

claim. As a result, the State agency is

unable to determine if the claim is

delinquent. This policy only pertains to

these situations. (See § 273.18(e)(5)(v)).

Is the claim still considered delinquent

if the household is making a good faith

effort to pay the claim?

The existing rules provide for a

comprehensive notice and an

opportunity to have a payment plan

reinstated if an installment payment is

missed.

The proposed rule eliminated this

provision. Three recipient interest

groups commented that this provision

should be reinstated. They contend that

there may be many reasons why a

payment may be missed, and those who

are making a good faith effort to repay

the claim should be protected. We agree

with the commenters that a single

missed or partial payment should not

automatically subject the household to

the involuntary collection actions

brought about by TOP. When a good

faith effort is being made to pay the

claim, circumstances do exist where it

may be appropriate to reinstall or renegotiate the repayment schedule.

However, even though the provision

providing for this opportunity is

removed, the effect of the provision is

still the same. Under both the existing

rules and Section 13(b)(4) of the

amended FSA (7 U.S.C. 2022(b)(4)),

State agencies already determine

whether to accept a proposed

reinstatement or re-negotiation plan.

This final rule in no way prohibits

households that are making a good faith

effort from requesting reinstatement or

re-negotiation of its payment plan and

we strongly encourage State agencies to

consider such requests on a case-by-case

basis. In addition, if hardship exists, a

State agency may compromise a claim

and/or adjust the installment payment

to lower amount.

Should delinquency be pushed back to

at least 90 days after the demand letter?

We defined delinquency as when

payment is not made by the due date.

This due date is not to be more than 30

days after the date of the initial demand

letter (see § 273.18(e)(3)(v)). Three

recipient interest groups suggested that

the delinquency time frame should be at

least 90 days. This 90 day period

corresponds to the time period when the

claim may be appealed as well as

providing households with adequate

time to determine how to address the

claim. The commenters also contend

that State agencies will incur

unnecessary administrative expenses

because they would need to reverse any

collection process in place when the

claim is appealed.

We disagree with the commenters that

90 days would be more appropriate. The

delinquency date is primarily used to

determine whether a claim is to be

referred for TOP. As specified in this

final rule at § 273.18(n)(1)(i), a claim

must be delinquent for 180 days before

being referred for TOP. Combined with

a 30-day delinquency time frame, this

already provides the household with up

to 210 days after the initial demand

letter to adequately address its claim. In

addition, relatively few households

request fair hearings on claims. State

agencies have indicated that those

households that do request a fair

hearing usually make the request shortly

after receiving the notice. Therefore,

extending the delinquency time frame to

accommodate the fair hearing time

frame serves no practical purpose for

either the household or the State

agency. This proposal is carried over

into the final rule. (See § 273.18(e)(5)).

Household Cooperation Waiver

Authority

The ‘‘Calculating Overissuance

Claims’’ section on page 29307 of the

preamble to the proposed rule discussed

allowing a State agency to waive up to

20 percent of the claim if the household

cooperates with the establishment of its

claim. However, we did not include this

in the proposed regulatory text. Three

commenters supported including this

incentive in the final rule. However,

eight commenters disagreed with this

incentive stating that household

cooperation should not be a basis for

reducing an overissuance. We concur

with the eight commenters and did not

include this incentive in this final rule.

Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations 41763

Terminating and Writing-Off Claims

A terminated claim is a claim for

which all collection action has stopped.

A written-off claim is a claim that is no

longer subject to our reporting and

collection requirements. We proposed

that a terminated claim must be

immediately written off. The table

below summarizes our proposed policy

for State agencies on terminating and

writing-off claims:

PROPOSED TERMINATION POLICY

If . . . Then you . . . Unless . . .

(1) a hearing or court finds the claim to be invalid.must terminate and write-off the claim or determine if an IHE or AE claim still exists.

(2) all adult household members die .................. must terminate and write-off the claim ............ you plan to pursue the claim against the estate.

(3) the claim balance is $25 or less and the

claim has been delinquent for 90 days or

more.

must terminate and write-off the claim ............

(4) you determine it is not cost effective to pursue the claim any further.must terminate and write-off the claim if we

previously approved your cost-effectiveness

criteria.

we have not previously approved your overall

cost-effectiveness criteria.

(5) the claim is delinquent for three years or

more.

must terminate and write-off the claim ............ you have received prior collections through

the Federal Offset Program, state tax refund offset or any similar collection mechanism.

(6) a new collection method is introduced or an

event (such as winning the lottery) occurs to

substantially increase the likelihood of further

collections.

may reinstate a terminated and written-off

claim.

The public submitted 19 comments

regarding this proposal. Four State

agencies supported this proposal as

written. The other commenters had

concerns primarily focusing on

accounting treatment, the three year

termination time frame, and claim

reinstatement.

Can a claim be found to be invalid (and

subsequently terminated under the first

criterion) only as a result of a hearing?

Two commenters pointed out that

terminating an invalid claim should not

be limited to hearing decisions.

Occasionally, a State agency becomes

aware of factual information that

negates an already established claim. In

these instances, the commenters believe

that the State agency should have the

authority to terminate the claim. We

agree. The final rule at

§ 273.18(e)(8)(ii)(A) reflects this change

by not limiting this termination

criterion to hearing and court decisions.

Is writing-off an invalid claim

considered proper accounting?

One commenter stated that a claim

found to be invalid (see criterion (1)

above) should not be written-off but

disposed of in another manner. The

reason is that only ‘‘bad debts’’ should

be written-off. An invalid claim is not

a bad debt but rather a debt that never

should have existed in the first place.

We agree with the commenter.

Therefore, in the final rule, we will

reflect that all debts terminated because

they are invalid will be considered a

balance adjustment rather than a writeoff. (See § 273.18(e)(8)(ii)(A)).

Why is the time frame for terminating

delinquent claims only three years?

Six commenters expressed concern

that three years are not long enough to

pursue collection before terminating

and writing-off the claim. According to

the commenters, experience has shown

that the nature of the Treasury Offset

Program (TOP) is such that significant

collections often take place after the

claim is delinquent for three years.

The purpose of proposing the three

year time frame is to dispose of

receivables that are laying idle and the

likelihood of further collection action is

relatively low. Recent audits and

management reviews indicated a need

to dispose of these claims. However,

after considering these comments, we

are going to modify this proposal. The

final rule still allows State agencies to

terminate claims that have been

delinquent for three years. However, a

State agency is not required to terminate

the claim if it believes it is cost effective

to retain the claim in TOP beyond the

three years. In this manner, claims will

either be terminated or actively pursued

in TOP. No claim will be allowed to

simply remain idle. (See

§ 273.18(e)(8)(ii)(E)).

How does the cost-effectiveness criteria

for terminating claims (the fourth

criterion) differ from the costeffectiveness criteria for the threshold

for establishing and collecting claims?

Clarification is needed in this area.

The cost-effectiveness determination for

terminating claims applies only to

claims that are already established and

are delinquent. These claims are

relatively low dollar amount claims that

are not actively being collected, the

regular avenues of collection have been

exhausted, and are simply not worth

further collection pursuit. This criterion

may not be used for claims that are

current or are being paid. Claims are not

to be automatically terminated when an

outstanding receivable drops below a

certain dollar amount. State agencies

should contact us if they need further

guidance in this area.

Why do we allow reinstating terminated

and written-off claims?

Five commenters expressed concerns

about the proposed policy to reinstate

terminated and written-off claims. The

commenters generally opposed making

this proposal a requirement. Concerns

focused around this proposal imposing

an unnecessary burden on State

agencies for storage and record

maintenance for a very small percentage

of cases.

We want to stress that this was

proposed as an option and is not

mandatory. A number of State agencies

indicated a great desire to have this

ability. This was proposed simply to

enhance State agency flexibility. In the

final rule, this ability will remain as an

option. Only those State agencies that

wish to pursue this course need to store

and maintain records of terminated

claims.

41764 Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations

Why don’t we establish a termination

policy based on dollar amounts?

One State agency commented that it

would like to have the latitude to set

different time schedules for termination

and write-off based upon the amount

and the cause of a claim. The

commenter stated that notable

differences exist between a $200 AE

claim and a $10,000 claim caused by an

IPV and these differences ought to be

recognized when establishing

administrative offsetting polices for

writing-off delinquent claims. This is a

valid point. We believe that the final

rule at § 273.18(e)(8)(ii)(E) provides for

this flexibility. First, any claim that is

delinquent for six months, be it for $200

or $10,000, should be referred for TOP.

There will be no requirement to remove

either claim from TOP for termination

after three years. Second, under

§ 273.18(e)(8)(ii)(D) in the final rule, the

State agency has the authority to create

its own cost effectiveness termination

criteria. We do not object to any State

agency treating IPVs differently from

other claims when determining these

criteria.

Should the termination policy be

expanded to include other situations?

One commenter stated that the

termination policy should include

bankruptcy cases and in instances

where the responsible party is in a

nursing home. We recognize that the

possibility of collection diminishes in

these situations. However, we do

authorize State agencies in § 273.18(j) of

this final rule to pursue claims that file

for bankruptcy. For the nursing home

situation and in other instances where

household circumstances negate further

collection, the State agency can

compromise the remaining balance of

the claim (see § 273.18(e)(7)), thereby

gaining the same result as a termination

and write-off. No change in the rule is

necessary based on this comment.

What changes regarding this proposal

are incorporated into the final rule?

In addition to the changes discussed

above, State agencies may also terminate

a claim if the household cannot be

located. We discuss this in the

Notification of Claim section of this

preamble. All of the changes are

reflected in the table at § 273.18(e)(8)(ii)

in the final rule.

Compromising Claims

Reducing a claim because a

household is unable to pay is known as

‘‘compromising’’ a claim. We proposed

two changes in our policy on

compromising claims. The first

proposed change limits the State

agency’s authority to compromise

claims to under $20,000. The second

proposed change reinstates the

compromised portion of a claim if the

remaining claim balance subsequently

becomes delinquent. We received 12

comments on compromised claims. Ten

of these comments dealt directly with

these two proposed revisions. The

remaining two comments addressed

other aspects of our policy on

compromising claims.

Why propose a $20,000 limit for

compromising claims?

Five commenters opposed

establishing the $20,000 limit for

compromising claims on the basis that

the limit was too restrictive. One of the

commenters added that attorneys

should be allowed to compromise these

larger claims through civil or criminal

prosecution.

We took the $20,000 limit in the

proposed rule directly from Treasury’s

Federal Claims Collection Standards, 4

CFR 103.1, (FCCS). OMB Circular A–

129 increased this limit to $100,000.

One of the goals of this rule is to

conform, wherever feasible, with the

FCCS and other Federal debt collection

guidelines. However, we must take into

account that recipient claims are unique

in that they are State-administered

Federal claims. The comments show

that there are instances, such as during

prosecutions, where it is appropriate to

allow States to retain the right to

compromise any claim. Past practices by

State agencies show that the current

compromise policy (that has no dollar

limit) is not being abused. Considering

this, we have decided to delete this

proposal and allow State agencies to

continue to compromise any claim. (See

§ 273.18(e)(7)).

Why mandate reinstatement of

compromised amounts if the remaining

balance becomes delinquent?

As stated above, a second proposed

change reinstates the compromised

portion of a claim if the remaining claim

balance subsequently becomes

delinquent. This proposal provides an

added deterrent against a debt becoming

delinquent. Five commenters objected

to this proposed mandate. The reasons

given were: (a) Mandatory reinstatement

is too harsh given the household’s

economic circumstances; (b) reinstating

the compromised amount may go

against a court order; (c) the proposal is

too complex to administer; and (d)

costly system changes are needed to

implement the proposal.

Considering these comments, we

recognize that mandating reinstatement

of compromised claims places an added

burden on State agencies. This burden

goes beyond what we believe is

necessary for efficient and effective

claims management. Therefore, we are

revising this proposal to give State

agencies latitude in this area. In the

final rule, reinstatement is a State

agency option rather than a mandate.

(See § 273.18(e)(7)).

Should we even allow State agencies to

compromise claims?

One commenter believed that no

claims should be compromised. We

disagree. Compromising claims is a

proven effective claims management

tool widely used in both the public and

private sectors. With compromising

authority, State agencies can manage

their outstanding receivables better by

pursuing amounts that they can expect

to collect.

Accepting Payments

Are State agencies required to accept

credit and debit card payments?

The proposed rule allows State

agencies to accept payments from credit

and debit cards if the agency has the

capability to accept such payments. One

State agency expressed a concern that

claims may need to be waived if

agencies do not accept a credit or debit

card when it is authorized by us. This

is not the case. We only authorize this

collection method. We do not require it.

No change is needed in the final rule.

Will we reimburse State agencies for

credit card processing fees?

One State agency asked whether we

will reimburse State agencies for credit

card processing fees. Credit card

processing fees will be reimbursed at

the same rate as all other allowable

administrative costs. This rate is

currently 50 percent. Since this is

consistent with the reimbursement rules

at 7 CFR 277.4, no change is needed in

this rule.

What about debts that are to be paid for

with community service?

One State agency commented that we

need to add provisions to accommodate

debts being paid through community

service. The agency further states that

some judges in its State are ordering

community service at an hourly rate

ranging from $15 to $100. The

commenter believes that this rate should

not exceed minimum wage.

We concur that a provision is needed

to recognize that debts may be settled by

community service. This addition can

be found in § 273.18(g)(7) of the final

rule. Since community service activity

varies greatly, we are reluctant to set a

specific hourly rate for such work.

Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations 41765

Therefore, we leave it up to the State

agency, in conjunction with the court, to

determine this rate.

Is requiring the pro-rata distribution of

non-specified payments now required?

We proposed that each affected

assistance program with a claim receive

its fair share when the State agency

receives an unspecified collection for a

combined public assistance/food stamp

recipient claim. An unspecified

collection is a general payment received

in response to a notice or referral in

which the food stamp claim is

combined with another claim(s). Our

primary concern is that, on occasion,

State agencies give PA/TANF claims

first priority in unspecified collections.

The reason for this is because the State

agency retains 100 percent of PA/TANF

collections. On the other hand, the State

agency retains an aggregate of only

about 22 percent of FSP claim

collections. The remaining 78 percent

(consisting of 65 percent of IPV

collections, 80 percent of IHE

collections and 100 percent of AE

collections) is returned to us.

Nine State and local agencies objected

to this proposal. One objection is that

this proposal will require large-scale

system changes. Two State and one

local agency believed that the State

should be able to assess collections to

where they believe it would be most

beneficial. Other State agencies

commented that prior agreements with

households should take precedence.

Our goal with this proposal is to

ensure that State agencies are not

routinely assigning all unspecified

claims collections to non-FSP programs.

This provision does not pertain to any

existing or future agreements with

households or collection methods

targeting a payment to a certain

program. Only unspecified payments

are included and we strongly believe

that these collections should be

distributed fairly. We do not believe that

this places an undue burden on State

agencies. Therefore, we have retained

this proposal in the final rule at

§ 273.18(g)(9). Any State that has an

alternative distribution system that is

equitable or believes that it will take

large-scale system changes to comply

with this provision can submit a waiver

request for our consideration.

Collection of Agency Error Claims

Prior to the enactment of PRWORA,

AE claims could only be collected on a

voluntary basis. PRWORA amended

section 13 of the FSA (7 U.S.C. 2022) to

subject all claims—including AE

claims—to involuntary collection

methods. This change was reflected in

the proposed rule. We received a wide

range of comments in this area.

Is holding households responsible for an

error that was not their fault considered

good public policy?

Three State agencies commented that

using involuntary collection methods to

recoup these claims is not good public

policy since the households may not

even have been aware of the error prior

to the implementation of the

involuntary collection actions. One

commenter stated that the follow-up

work necessary for the State agency to

answer inquiries as well as conduct

hearings takes up a disproportionate

amount of time. In addition, the same

commenter believed that the focus of

the new provisions affecting AE claims

should not be on the household but on

the food stamp agency that caused the

error.

We recognize the commenters’

concerns and are working with State

agencies to reduce these types of errors.

However, a household with an AE claim

did, in fact, obtain more benefits than it

was entitled to receive. But most

importantly, section 13 of the FSA (7

U.S.C. 2022), as amended by PRWORA,

is clear that all overpayments are to be

collected. Any stipulations in the law to

make special allowances for

overpayments caused by agency errors

were removed by PRWORA. Therefore,

we believe that we are following the

intent of Congress by having State

agencies vigorously pursue these

overpayments.

Why aren’t AE claims subject to

equitable estoppel?

Equitable estoppel is a legal concept

adopted by a number of States that

provides that individuals should not be

held responsible for errors that were not

their fault. The preamble of the

proposed rule at 63 FR 29307 clarified

that, since food stamps are Federal

benefits, Federal law does not allow for

an exception for equitable estoppel in

AE claims. We received three comments

regarding this issue.

Two recipient interest groups

disagreed with our position on AE

claims and equitable estoppel. They

believe that the FSA does not

specifically prohibit equitable estoppel,

especially since this activity is

delegated to State agencies. We disagree.

Section 13(a)(2) of the FSA clearly states

that a household ‘‘ . . . shall be . . . liable

for the value of any overissuance of

coupons.’’ This language establishes

that a household must be held

accountable for any claim, including

those caused by agency errors.

One State agency commented that we

need to strengthen the fact that

equitable estoppel does not apply to

food stamp AE claims. The commenter

suggested that we add specific language

to the regulations indicating this

position. We do not believe that this is

necessary. The discussion above and in

the preamble of the proposed rule

should suffice and no change is needed

in the final rule.

Should we have the same rule for

dropping AE claims that exists in the

Supplemental Security Income Program

(SSI)?

We received four comments

recommending that we establish a

policy similar to SSI for waiving AE

claims. In SSI, a claim may be waived

if:

(a) The overpaid individual was

without fault in connection with the

overpayment, and

(b) Adjustment or recovery of the

overpayment would either:

(1) Defeat the purpose of the SSI

program, or

(2) Be against equity and good

conscience, or

(3) Impede efficient or effective

administration of the SSI program due

to the small amount involved.

The commenters are particularly

interested in waiving AE claims that fit

criteria (b)(1) and (b)(2) above. We

recognize that this recommendation

does have some merit. However, we

believe that State agencies already have

similar authority. State agencies are

currently authorized to compromise

claims when households are unable to

pay because of hardship or similar

reasons. Therefore, we do not believe

that this change is necessary.

Allotment Reduction

The proposed rule introduced a

number of changes in allotment

reduction as a means of claims

collection. We received a number of

comments on these changes and

allotment reduction in general.

Is allotment reduction now required for

participating households with claims?

The proposed rule states that a State

agency must use allotment reduction to

collect claims against participating

households. Five commenters believe

that State agencies should be able to

choose whether to invoke allotment

reduction against a particular

household. Four of the commenters

point out that that section 13(b)(4) of the

FSA (7 U.S.C. 2022(b)(4)) was amended

by PRWORA to specify that claims are

to be collected in accordance with ‘‘. . .

requirements established by the State

41766 Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations

agency for . . . electing a means of

payment. . . .’’

We recognize this passage in the FSA.

However, section 4(c) of the FSA (7

U.S.C. 2013(c)) states that we must issue

regulations necessary for the effective

and efficient administration of the FSP.

As discussed earlier in this preamble,

allotment reduction is the most efficient

collection method. Therefore, we

believe that it is within our authority to

mandate allotment reduction. However,

to maintain the spirit of this rule, we do

not object if a State agency wishes to use

an alternative collection method. The

only requirement is that the household

will be paying off the claim at least at

the same level as the amount that would

have been collected through allotment

reduction. This is reflected in

§ 273.18(g)(1)(i) of this rule.

Doesn’t allowing involuntary allotment

reduction for AE claims established

before PRWORA violate due process?

Section 844 of PRWORA amended

section 13 of the FSA (7 U.S.C. 2022) by

removing the provision prohibiting

State agencies from using involuntary

allotment reduction against households

with AE claims. The proposed rule

allows this type of collection and does

not exclude those AE claims that were

established prior to the enactment of

PRWORA. Four recipient interest

groups submitted comments stating that

this change should not apply to prePRWORA AE claims. The specific

concerns of the group are that: (1) The

law makes no provision to apply the

allotment reduction retroactively and (2)

to do so would violate the household’s

due process rights.

We recognize that PRWORA is silent

on the question of whether this

provision applies to claims established

before the passage of PRWORA.

However, we believe that recoupment of

all claims regardless of the date of

establishment is consistent with and

implied by the FSA. Prior to PRWORA,

households were still obligated to pay

AE claims. By allowing allotment

reduction for pre-PRWORA AE claims,

we are simply introducing an additional

collection procedure. We are not

altering the status of the claim.

The commenters were also concerned

that this action would violate due

process rights. We shared this concern.

For this reason, when PRWORA was

originally enacted, we instructed State

agencies to re-notice households that

would be affected by this change in the

law. Since this procedure affects a

limited number of cases and State

agencies have already been notified, we

do not believe that this needs to be

specified in the final rule.

Why can’t State agencies reduce

benefits for the first month that a

household receives benefits?

The proposed rule carried over our

longstanding policy not to reduce an

initial allotment to pay off a claim. The

reason for this is because the allotment

is frequently reduced based on when the

household’s application was filed.

Three State agencies disagreed with this

policy. The commenters recommended

that a pro-rated reduction be done based

on the reduced allotment. The State

agencies saw no reason why it should

lose this month in which the claim

could be collected.

While the commenters do raise valid

points, we hesitate to change this

longstanding policy. First, as stated

above, the household’s allotment is

already reduced. Second, there was no

discussion to change this policy in the

proposed rule. The final rule remains

unchanged.

As a State agency, why can’t I collect a

claim from the same household by using

TOP in addition to allotment reduction?

The proposed rule does not allow a

State agency using allotment reduction

to also collect the claim from members

of the same household using TOP. One

State agency commented that it should

be able to use both methods

simultaneously. We disagree. TOP is for

non-participating household members.

We do not believe members in

households that are currently receiving

benefits should, at the same time, be

subjected to the delinquent processing

charges imposed by TOP. The final rule

remains as proposed.

Can State agencies use additional

collection methods against a household

at the same time while they are

collecting through allotment reduction?

Four commenters believed that State

agencies should be able to use

additional non-TOP collection methods

against a household that is having its

allotment reduced. Conversely, five

commenters supported not allowing

additional collections in this

circumstance. State agencies regularly

employ their own methods to collect

food stamp recipient claims. These

methods include but are not limited to

lump sum and installment payments,

wage garnishments, UCB intercept, and

State tax refund and lottery winnings

offsets. Although we provide the State

agency broad authority in this area, we

do not believe that it is fair to the

household for the State agency to

employ most of these additional

collection methods when the household

is already having its allotment reduced.

This is reflected in this final rule. There

are two exceptions to this rule: (1) When

the additional payment is voluntary; or

(2) when the source of the payment is

irregular and unexpected such as a State

tax refund or lottery winnings offset.

(See § 273.18(g)(1)).

Why did we increase the minimum

allotment reduction amount for IPV

claims to $20 per month?

Current regulations at 7 CFR

273.18(g)(4)(iii) limit the reduction

amount for an IPV claim to the greater

of 20 percent of a household’s monthly

entitlement or $10 per month. The

proposed rule increased the $10 to $20.

One recipient interest group objected to

this increase. The commenter believed

that this is unnecessarily punitive to

households and adds little increase in

collection receipts to State agencies. We

disagree. We do not believe that the

additional $10 per month, especially

when a household member was

involved in such a serious infraction,

would create a significant household

burden. In addition, little additional

work is needed by the State agency to

collect the additional amounts. The

final rule remains unchanged. (See

§ 273.18(g)(1)).

Can State agencies ever reduce an

allotment at a rate greater than the

prescribed limits?

The proposed rule set limits for the

maximum rate of allotment reduction.

For IPV claims, the proposed rate is $20

or 20 percent (whichever is greater) of

the entitlement or allotment. For IHE

and AE claims, the rate is $10 or 10

percent of the allotment, whichever is

greater. Two State agencies

recommended that they be given

authority to reduce allotments at rates

higher than what we proposed. The

commenters believe that households

with additional income and resources

should be able to have their benefits

reduced at a greater percentage.

We want to make it clear that, with

the household’s permission, State

agencies are able to reduce an allotment

at a rate higher than the prescribed

limit. This is carried over into the final

rule. We are not, however, allowing

State agencies to collect at higher rates

without this permission. Section

13(b)(3) of the FSA (7 U.S.C. 2022(b)(3))

establishes these limits (the greater of 10

percent or $10) for IHE and AE claims.

This rate cannot be changed. We believe

that the doubling of this rate (to the

greater of 20 percent or $20) is fair for

IPV claims. The final rule remains

unchanged. (See § 273.18(g)(1)).

Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations 41767

Why allow State agencies to use benefit

entitlement rather than the actual

allotment for determining how much of

a monthly payment to use for IPV

allotment reductions?

The current regulations at 7 CFR

273.18(g)(4)(iii) required State agencies

to base IPV allotment reduction on

entitlement rather than the actual

allotment. Entitlement is what the

household would have received if the

individual who received the IPV was

still participating. In the proposed rule,

we gave State agencies the option to use

the actual allotment as the base. Three

recipient interest groups recommended

that we just have State agencies use the

allotment rather than entitlement. The

commenters believe that basing the

reduction on entitlement places too

much of a burden on households.

As discussed above, State agencies are

currently required to base IPV allotment

reduction on entitlement. In the final

rule, we are allowing State agencies to

use the allotment as the basis. This, in

itself, would provide relief to some

households. Requiring all State agencies

to base IPV benefit reductions on

allotment at this time would go against

the spirit of this rule by reducing the

amount of flexibility afforded to State

agencies. In addition, some State

agencies would incur significant costs

for system changes. The final rule

remains unchanged.

Can State agencies now use benefit

allotment as the basis for reducing

allotments against households that are

already getting their benefits reduced

based on the entitlement?

One State agency asked if it can apply

this rule change to households that are

already getting their benefits reduced

based on the entitlement. We do not

place any limits on the applicability of

this provision in the final rule and have

no objection to the State agency’s

request.

Collecting a Claim From Individuals in

Separate Households

All adults who were members of the

household when the overpayment

occurred are responsible for repaying

the claim. The proposed rule allows the

State agency to pursue additional

collection activity against any

individual liable for the claim who is

not currently a member of a

participating household that is

undergoing allotment reduction. Several

commenters supported this provision.

One State agency had the following

question:

Are State agencies required to reduce

the allotments of all affected households

when two or more individuals

responsible for the claim are now

receiving benefits in different

households?

The State agency is concerned

because many State systems are not set

up to accommodate this type of

simultaneous collection. The

commenter believes that the State

agency should have the option to collect

from only one of the participating

households. While there is a definite

benefit to having simultaneous

allotment reductions, we recognize and

share the State agency’s concern.

Therefore, to maintain the spirit of this

final rule, we are allowing, but not

requiring, this type of collection. (See

§ 273.18(g)(1)).

Using EBT Benefits To Collect a Claim

The current regulations are silent on

using EBT benefits to collect a claim.

We proposed the following policy in the

May 28, 1998 rule:

PROPOSED EBT BENEFITS CLAIMS COLLECTION POLICY FOR STATE AGENCIES

You must . . . and . . . and . . .

(1) allow a household to pay its claim using

benefits from its active food stamp EBT benefit account.

the household must give you written permission.the retention rules apply to this collection.

(2) allow payments from stale EBT benefit accounts once the account is reactivated.the household must give you written permission.the retention rules apply to this collection.

(3) adjust the amount of the claim by subtracting any amount expunged from the claim

balance.

this can be done either when establishing the

claim or anytime after.

the retention rules do not apply to this adjustment.

An active EBT account, as referred to

in the first row of the table, is one where

the household readily has access to the

account. Generally, provided the

household accesses its benefit account

each month, the account remains active.

If the account is not accessed for three

months or longer, the account is

considered dormant or stale. To activate

a stale account, the household must first

contact the State agency. An expunged

account, as referred to in the third row

of the table, is when the State agency

erases the value of the benefits from the

household’s account and reports to us

the total amount expunged so that we

may deobligate the funding. No funds

are ever paid. This is usually after no

benefits have been accessed from the

account for one year. The household

permanently loses these benefits.

We received 53 comments on this

comprehensive proposal. Six of these

comments supported some aspect of this

proposal. The remaining 47 comments

had specific concerns. Because of the

nature of the comments, we are dividing

this discussion into two parts:

Collecting Claims Using Active and

Stale EBT Benefits and Adjusting Claims

using Expunged EBT Benefits.

Collecting Claims Using Active and

Stale EBT Benefits

We proposed that State agencies be

able to collect claims from active or

stale EBT benefit accounts with the

household’s permission. State agencies

would retain the usual amounts for this

method of collection. We received a

number of comments on the use of

collection method:

How can State agencies obtain funding

to implement this procedure?

Two State agencies expressed concern

about obtaining funding to implement

this provision. The commenters noted

that some State agencies will need to

purchase equipment to access EBT

accounts and conduct these

transactions. However, the commenters

provided no information that these costs

are prohibitive. Funding is available in

the usual manner with State agencies

being compensated according to the

reimbursement provisions for

administrative costs in section 16(a) of

the FSA (7 U.S.C. 2025(a)). In addition,

State agencies will also receive the

regular retention amounts for these

collections.

41768 Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations

What procedures must be used when

State agencies access households’ EBT

benefit accounts to collect claims?

State agencies are to develop their

own procedures for accessing EBT

benefit accounts. One recipient interest

group expressed a concern about the

security of EBT accounts. We agree with

the commenter that security procedures

must be in place to ensure that only

those workers that are authorized

actually gain access to a household’s

EBT benefit account. To address this,

we already have EBT system security

regulations in place at 7 CFR

274.12(h)(3). The EBT security

regulations include dual controls and

access controls such as passwords for

those authorized to perform this

activity. Therefore, there is no need to

duplicate this regulation in § 273.18 of

this rule.

Why are these payments treated as noncash payments?

The proposed rule specifies that a

collection using EBT benefits is

considered a non-cash collection and

corresponding funds are not to be drawn

from the Federal EBT account by the

State agency. Two State agencies are

concerned that this policy will create

discrepancies in their account

receivable systems. The commenters

believe that since this non-settling

transaction will not be handled as a

cash transaction, the amount drawn

from the Federal EBT account will not

equal the withdrawals from the

households’ accounts.

We see no reason why a State agency

needs to draw down Federal funds only

to return them at a later date. Current

EBT systems accommodate this

transaction as non-settling without

difficulty. The original scheme for EBT

repayment of claims was designed to fit

within the current reporting and

retention processes State agencies have

in place for coupons. Payment via

coupons has always been considered a

non-cash transaction for retention and

reporting purposes. The rule remains

unchanged. (See § 273.18(g)(2)(iii)). We

are available to provide technical

assistance if State agencies still believe

that they are unable to do this

procedure.

Should we provide model household

permission forms for State agencies to

use for gaining household permission

for EBT collections?

In the proposed rule, we require that

collections from active EBT benefit

accounts be transacted only with the

written permission of the household.

One recipient interest group

recommended that we provide State

agencies with model authorization

forms to ensure that the household’s

consent is informed and voluntary. We

agree with the commenter that

additional guidance is needed in this

area. However, in lieu of providing a

model form (which stifles State agency

flexibility), we are providing a clear

listing of the minimum requirements for

a household permission form. This

listing serves the same purpose as a

model form and is found in

§ 273.18(g)(2)(iv) of this final rule.

Should written permission be for an

indefinite period?

The preamble for the proposed rule

stated that a signed document is not

necessary for each EBT collection if the

transaction was provided in accordance

with a signed agreement. We received

five comments regarding this issue. Two

commenters recommended that we

place a limit on the length of these

agreements. We believe that State

agencies should be able to limit the

length of these agreements as they wish.

However, we do not believe that it

would be within the spirit of this rule

to mandate that these agreements be

limited.

Three commenters recommended that

a household be allowed to revoke prior

authorizations. Since this type of

collection is strictly voluntary, we agree

with the commenters. This change is

found in § 273.18(g)(2)(iv)(E) of this

final rule.

Does permission to collect through EBT

benefit accounts always need to be in

writing?

One commenter recommended that

State agencies be able to use

documented verbal authorization on a

limited basis. According to the

commenter, it is practical and less

burdensome for both the household and

the State agency to be able to conduct

a single transaction while obtaining

authorization from the household over

the telephone. The household would

then be sent a receipt documenting the

transaction.

We concur with this recommendation

and are including it in the final rule at

§ 273.18(g)(2). This procedure

streamlines the process without

sacrificing the rights of the household.

In the case of a misunderstanding, the

household can always request the return

of the benefit in a fair hearing.

Is there any way that State agencies can

collect on a stale EBT benefit account

without receiving prior authorization?

One commenter recommended that

State agencies be able to collect without

prior written authorization from stale

EBT accounts. They believe that with

this authority State agencies could

recover, and possibly, close many

outstanding claims. We share the

commenter’s concern and belief.

Therefore, we have devised a procedure

to allow this type of collection while

safeguarding the rights of the

household.

In the final rule, State agencies may

reduce benefits from stale EBT accounts

to collect claims using the following

procedure:

(1) The State agency mails or

otherwise delivers to the affected

household notification that the agency

intends to reduce the household’s stale

EBT benefit to pay off an outstanding

claim. (2) The notification specifies a

time period for the household to

respond if it does not want its benefits

to be used to pay off the claim. This

time period, which is to be established

by the State agency, must be at least 10

days. (3) If the household does not

respond by the established time period,

the State agency then may reduce the

EBT benefit account to pay off the

claim.

We believe that this procedure strikes

an appropriate balance between efficient

claims collection and household rights.

With this procedure, households can

easily pay off and State agencies dispose

of claims. In addition, any household

that does not want its benefits to be

reduced can simply prevent this by

notifying the State agency. (See

§ 273.18(g)(2)).

Why can’t State agencies involuntarily

collect from an EBT account when the

household was at fault?

Two State agencies believe that

permission should not be needed at all

to collect IPV or IHE claims through

EBT benefit accounts. We disagree.

These households are already

undergoing allotment reduction.

Allowing further involuntary benefit

reductions against these households

undermines the intent of section

13(b)(3) of the FSA (7 U.S.C. 2022(b)(3)).

This section places a limit on the

amount that a household’s allotment

can be reduced to pay a non-fraud

claim. We firmly believe that an eligible

household actively participating in the

program should not have additional

benefits involuntarily taken away. The

EBT benefit collection methods and

procedures discussed above strike a

balance between efficient and effective

claim collection from EBT benefits

while ensuring household rights and

access to those benefits.

Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations 41769

Collecting Claims using Expunged EBT

Benefits

An expunged EBT benefit is a benefit

that has been removed from a

household’s account because the

account is not being used. Benefits are

expunged when the account is not

accessed for one year. Since these

benefits were never used, we proposed

that they be subtracted from the claim

amount and recorded as an adjustment.

Also, because this is not considered a

collection, there would be no retention.

We received a number of comments on

the use of expunged benefits to adjust

claims.

Should State agencies receive retention

when using expunged benefits for

claims?

State agencies generally retain 35

percent of IPV collections and 20

percent of IHE collections. In the

proposed rule, we do not allow State

agencies any retention for reducing

claim balances with expunged benefits.

We received 15 comments

recommending that State agencies

receive the retention amount for these

transactions. The commenters believe

the retention for collecting claims

should be a reward for a State agency’s

comprehensive effort to establish and

pursue the claim. The fact that the claim

is reduced because it is an expunged

(rather than an active or stale) benefit

should not matter.

We recognize that establishing and

pursuing a claim is labor-intensive and

costly. Requesting retention for

expunged benefit adjustments is not

unreasonable. However, we are unable

to comply with this request because we

cannot provide retention for

‘‘collecting’’ an amount that no longer

exists. This provision remains as

proposed. (See § 273.18(g)(2)(ii)(C)).

Is proposing not allowing retention for

expunged benefits the first step towards

classifying all non-cash payments as

non-retention eligible?

Three commenters considered it a

dangerous trend to propose not allowing

retention for expunged benefits. They

believe that this is the first step towards

classifying all non-cash payments as

non-retention eligible. Non-cash

payments currently include payments

made from active and stale EBT benefit

accounts, allotment reduction, and food

coupons.

We proposed not allowing retention

for expunged benefits because this is an

adjustment rather than a collection.

Since the benefits have already been

returned to the Federal government,

there is no net gain by applying the

expunged amount against a claim. This

is not the case with non-cash claims

collections. As such, State agencies

need not be concerned about us

classifying non-cash payments as nonretention eligible. Unless we receive a

legislative mandate, we cannot foresee

us changing this policy. We strongly

believe that retention should remain an

inherent part of the claims collection

process.

Doesn’t using expunged benefits to

adjust a claim adversely impact basic

accounting procedures?

Two commenters are concerned that

allowing State agencies to reduce a

claim using expunged benefits would

adversely impact accounting treatment

and procedures. When benefits are

expunged, obligations and issuances are

reduced. In effect, the benefits no longer

exist as if they were never issued.

Therefore, according to one of the

commenters, it is not logical to reduce

a claim balance by benefit amounts that

no longer exist.

We agree with the commenters that

the benefit amounts no longer exist.

However, we do believe that we have

the authority and that it is appropriate

to allow balance adjustments based on

expunged benefits. This ability is based

on section 13(a)(1) of the FSA (7 U.S.C.

2022(a)(1)) which clearly provides us

with broad authority to adjust any

claim. The appropriateness is based on

the fact that the funds were available to

the household and never actually used.

Are State agencies required to reduce

claim balances with expunged benefits?

Six commenters, mostly recipient

interest groups, supported making this

procedure a requirement. We received

13 comments, mostly from State

agencies, that do not want this

procedure to be a requirement. These

State agencies stated that requiring this

procedure for all claims would be

burdensome, costly, and require

significant system changes. State

agencies would need to track benefits

issued and subsequently expunged for

an extended period.

While we believe that there are

definite benefits for using expunged

benefits to reduce claims, we recognize

that this change may, in fact, create a

burden for some State agencies. We also

recognize that current system

limitations and general household

dynamics may make this requirement

somewhat difficult for State agencies to

implement. Therefore, we are modifying

this requirement to include only those

expunged benefits for which State

agencies become aware. State agencies

are to develop their own procedures

regarding applicability, limits and use.

We are not requiring State agencies to

overhaul their EBT systems to conform

to this new procedure. (See

§ 273.18(g)(2)(ii)(C)).

Can State agencies reduce IPV claims by

using expunged EBT benefits?

One State agency commented that we

should not allow expunged EBT benefits

to be used to reduce IPV claims. The

commenter believes that this allows

violators to avoid their liability. We

disagree. Expunged benefits are benefits

that a recipient was once entitled to use.

By not using the benefits, the household

did experience a loss. Therefore, we do

not believe that a liability is being

avoided by allowing this type of

collection for EBT benefits. The final

rule allows State agencies to offset all

claims with expunged benefits.

Can State agencies reduce trafficking

claims by using expunged EBT benefits?

Three recipient interest groups

believed that expunged benefits should

also be used to reduce trafficking

claims. We agree. We believe that it is

important to maintain a consistent

policy in the application of expunged

EBT benefits against claims. Therefore,

the final rule reflects that expunged EBT

benefits can be applied to any claim.

(See § 273.18(g)(2)(ii)(C)).

Do the expunged benefits need to be for

the same month of the overissuance to

be applied to a claim?

Six comments were received

requesting clarification regarding

whether the expunged benefits needed

to be for the month of the overissuance.

Some commenters believed that the

expunged benefits should be only for

the month of issuance. Other

commenters expressed concern about

not always being able to match up the

expunged benefit with the overpayment.

We recognize that for some State

agencies matching up the benefits with

the overpayment may be difficult and

burdensome. For this reason, we are

providing latitude in this area by

allowing States to apply expunged

benefits to any overissuance. (See

§ 273.18(g)(2)(ii)(C)).

Where in this rule is the final policy on

using EBT benefits to collect claims?

The final policy, including changes

based on the comments addressed

above, is at § 273.18(g)(2).

Intercept of Unemployment

Compensation Benefits

The proposed rule gives State

agencies the option to reduce a person’s

unemployment compensation benefit

41770 Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations

(UCB) to pay off a claim. Section

13(c)(3) of the FSA (7 U.S.C. 2022(c)(3)),

however, requires that the State agency

first obtain a court order or

authorization from the individual prior

to reducing the UCB. One State agency

objected to this requirement. We

recognize that this requirement makes it

more difficult for State agencies to use

this method effectively. However, we

cannot change this requirement, since it

is specified in the FSA. As a result, this

requirement remains in the final rule.

(See § 273.18(g)(6)).

Offsetting Restored Benefits

The proposed rule continued our

longstanding policy that State agencies

are to offset restored benefits owed to a

household by the amount of any

outstanding claim. A restored benefit is

a benefit from a prior month that the

household was entitled to but never

received. Five recipient interest groups

objected to this provision. The

commenters believe that a households

should receive the full amount of any

benefits that are restored. They cite a

recent court ruling, Lopez v. Espy, 83

F.3d 1095 (9th Cir. 1996), in which the

court made this ruling.

We are aware of this ruling. However,

there is another court ruling, Dunn v.

Secretary of U.S. Department of

Agriculture, 921 F.2d 365 (1st Cir,

1990), in which our policy was upheld.

We continue to believe that it is within

our authority to have State agencies

offset benefits prior to restoration. The

final rule remains unchanged. (See

§ 273.18(g)(3)).

Collection Limits

The proposed rule did not place a

limit on how much can be collected

from a household during any given year.

Three recipient interest groups

recommended that a household should

not be subject to collection amounts that

total over 15 percent of the household’s

annual income. The commenters believe

that the proposals allowing

simultaneous collection methods

against the same households will result

in some households being subject to

onerous collection burdens. We do not

believe that this limitation is necessary.

State agencies have the ability to

compromise the claim if paying off the

claim is too much of a burden on the

household. In addition, the average

claim established in fiscal year 1999 is

$427. We do not believe that collecting

this claim, especially in installments, is

a severe burden. Finally, involuntary

allotment reduction is already capped at

20 percent or $20 for IPV claims and 10

percent or $10 for IHE and AE claims.

Based on the above, the final rule

remains unchanged.

Interstate Claims

The proposed rule at § 273.18(k)

required that State agencies accept

transfers of claims from other State

agencies if it is discovered that the

household is receiving food stamp

benefits within the receiving State. A

total of 17 comments were received

regarding this proposal. While all

commenters agreed with retaining this

proposal (at least) as an option, 15 of the

commenters did not support making

this proposal a requirement. Six

commenters stated that frequent moves

by recipients and the absence of a

national recipient database make this

proposal difficult to manage. In

addition, seven commenters expressed

concerns with problems associated with

fair hearing procedures and

coordination involving interstate claims.

We recognize that differences among

State agencies and the absence of a

national recipient database does make

this proposal difficult to manage. In

addition, we also recognize that the

advent of the Treasury Offset Program

has made the collection of interstate

claims for the originating State agency

much easier. Therefore, we are dropping

this proposal from the final rule.

Transferring claims between States will

remain an option. Even though this will

remain an option, we strongly

encourage State agencies to work

together to utilize this procedure as

much as possible.

Providing Refunds for Overpaid Claims

In the proposed rule, a State agency

is to provide a refund to the household

for an overpaid claim as soon as

possible after the State agency becomes

aware of the overpayment. Four

commenters recommended that ‘‘as

soon as possible’’ be defined as 30 days.

We agree with the commenters that a

refund needs to be prompt. However,

the existing language already requires

the State agency to do everything within

its control to provide a prompt refund.

Therefore, the final rule remains

unchanged. (See § 273.18(h)).

Retention Rates

Prior to PRWORA, the retention rates

for collections by a State agency were 50

percent for IPV claims and 25 percent

for IHE claims. Section 844 of the

PRWORA changed these rates by

amending section 16(a) of the FSA (7

U.S.C. 2025(a)). The new rates are 35

percent for IPVs and 25 percent for

IHEs. The proposed rule reflected this

change.

Eight State agencies opposed this

reduction to the retention rates. In

addition, one State agency

recommended a 10 percent retention for

AE claims. We recognize the effects of

the lower retention rates on State

agencies. However, since these

percentages are set by legislation, we

cannot change the rates. As a result, the

final rule contains the lower rates

mandated by Congress. (See

§ 273.18(k)).

The proposed rule also authorized 35

percent retention for IHE collections via

UCB offset. One State agency

recommended that State agencies have

an option to retain either 35 percent or

20 percent for these collections.

Programming costs to separately track

these collections, according to the State

agency, outweigh the additional revenue

generated by the higher retention rate.

We understand the State agency’s

concern. However, since this percentage

is set by legislation, we cannot change

this rate. The final rule remains

unchanged.

Bankruptcy

The current regulations at 7 CFR

273.18(k) authorize State agencies to act

on our behalf when households file for

bankruptcy. We did not propose any

changes to this policy. Two State

agencies did, however, submit

comments on bankruptcy.

Can IPV claims be discharged because

of bankruptcy?

On March 24, 1998, the Supreme

Court in Cohen v. de la Cruz, 523 U.S.

213 (1998), ruled that a fraud debt

cannot discharged in bankruptcy. One

State agency asked whether this ruling

applies to IPV claims.

The answer to this inquiry depends

on how the IPV was initially

determined. As discussed earlier in this

preamble, there are four ways that State

agencies determine IPVs: (1) An ADH,

(2) a court hearing, (3) a signed waiver

to an ADH and (4) a disqualification

consent agreement (DCA). If the IPV was

determined through a court hearing or

an ADH then we believe that this is a

finding of actual fraud and the Cohen

decision would apply. Whether this

finding of actual fraud applies to the

signed ADH waiver or the DCA depends

on whether the affected individual is

admitting to committing fraud or guilt

when he or she signs the document. Our

current regulations at 7 CFR 273.16

allow for individuals to accept

disqualifications without admitting

guilt. In these instances, we believe that,

since there is no actual fraud

determination, the resulting IPV claim

may potentially be dischargeable in a

Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations 41771

bankruptcy proceeding. Since this

determination must be made on a claimby-claim basis, being dependent on

State-developed notices, we are not

specifying any set policy in this final

rule.

Why can’t food stamp recipient claims

be routinely excluded from bankruptcy?

One State agency asked why recipient

claims cannot be routinely excluded

from bankruptcy like other Federal

debts. In view of the complexities

involved, we will be examining this

issue more closely and address it in a

future rulemaking.

Accounting Procedures

Accounting procedures for State

agencies to follow for recipient claims

were outlined in § 273.18(o) of the

proposed rule (63 FR 29329). States use

these procedures to obtain the

summarized data to be reported on the

Status of Claims Against Households

(FNS–209) report. We received one

comment on reporting this data.

How will these new procedures affect

the FNS–209 report?

One State agency objects to any

additional reporting requirements. The

commenter also believes that the FNS–

209 needs to be modified to capture the

appropriate data and there should be no

redundant reporting of data.

The FNS–209 is being revised to

reflect the changes brought about by this

rule. We will publish a 60-day notice on

the new form to provide you with an

opportunity to comment. The new FNS–

209 will contain only that information

that we absolutely need for Federal

program management. In addition, there

will be no redundancy with any of our

other forms or reporting requirements.

Delinquency and Processing Charges

The proposed rule allows for

delinquency and processing charges to

be charged against households with

delinquent claims. We received a

number of comments on this issue.

What authority do we have to impose

these charges?

One recipient interest group

questioned whether imposing these

charges on households is authorized by

the FSA. The FSA is silent on this issue.

The Debt Collection Act of 1982, 31

U.S.C. 3717, as amended, (DCA) allows

for a charge to cover the cost of

processing or handling a delinquent

claim. Since these charges are

authorized in the DCA and are not

expressly prohibited in the FSA, we are

able to include these charges in the final

rule.

What do we mean by imposing

processing charges on households?

Three commenters questioned the

appropriateness of this provision. The

commenters believed that imposing

these charges is an unfair and

unnecessary burden on recipients. Two

of the commenters stated that imposing

processing charges on recipients was

not cost effective and placed an

additional burden on State agencies.

We want to clarify that the only

charges authorized by this final rule are

the processing charges that are imposed

by Treasury for activity connected with

the TOP. Since these charges are

automatically imposed by Treasury, we

have no choice but to accept the

existence of these charges. As far as

passing these charges onto the

household, this provision only affects

delinquent claims that are submitted to

Treasury. Therefore, any household

whose claim remains current will not be

affected by additional charges. (See

§ 273.18(n)(3)).

Treasury’s Offset Programs

In the proposed rule, we referred to

Treasury’s methods of collecting

delinquent debts as the ‘‘Federal Claims

Collection Methods.’’ We are now

referring to these methods as Treasury’s

Offset Programs (TOP), which is

consistent with the name used by

Treasury. TOP is authorized by the

section 3701 of the DCA, as amended by

the Debt Collection Improvement Act of

1996, Public Law 104–134, (DCIA).

TOP encompasses several collection

methods and approaches. These

methods and approaches currently

include offsetting Federal payments

such as Federal income tax refunds,

Federal salary, retirement benefits and

other payments. TOP also includes a

broad-scope collection effort called

cross-servicing.

We began offsetting Federal tax

refunds (referred to as FTROP) as a twoState demonstration project in 1992.

The program has grown exponentially

since that time and FTROP became a

permanent collection method in 1995.

In calendar year 1998, FTROP

collections surpassed $65 million. Like

FTROP, Federal salary offset became

permanent in 1995. Both FTROP and

Federal salary offset were incorporated

under TOP with the implementation of

DCIA.

The proposed rule introduced

administrative offset and cross-servicing

into the mix of Federal collection

programs under TOP that will affect

households and individuals with food

stamp recipient claims. Administrative

offset is an umbrella name for offsets

conducted against Federal payments

due to individuals with delinquent

debts. An agency in Treasury, the

Financial Management Service (FMS), is

currently phasing in the implementation

of administrative offset. These payments

come from a variety of sources,

including, with some restrictions, social

security and black lung benefits. FMS

published a final rule (63 FR 71204) on

December 23, 1998, describing what the

restrictions will be and how this

program will work.

Cross-servicing is a comprehensive

collection approach mandated by the

DCIA and currently being implemented

by Treasury. This approach

encompasses administrative offsets as

well as vigorously pursuing claims by

using other collection actions such as

contacting the individual directly and

employing collection agencies. Since

the best way to implement this

provision of the amended DCA is still

being determined, we do not include

specific instructions or procedures for

cross-servicing in this proposed or final

rule. However, the specific collection

actions used in cross servicing are

already authorized by existing agency,

Departmental, and Treasury rules.

Therefore, we do not believe that any

further regulations are necessary to

implement cross-servicing.

Changes in Procedures and Inclusion in

this Final Rule

TOP has proved to be a dynamic

program. Both Treasury’s and our

procedures are regularly being updated

to increase efficiency as well as adapt to

the logistics and demands of the

program. We did not foresee this degree

of change when we originally drafted

the proposed rule. We now realize that,

because of the dynamic nature of TOP

and cross-servicing, any regulation

containing prescriptive procedural

language on TOP and cross-servicing

will soon become obsolete. For this

reason, we are taking a different

approach in this final rule.

Many of the procedural aspects found

in the proposed rule and in the existing

regulation at 7 CFR 273.18(g)(5) and

(g)(6) are removed from the final rule.

The final rule only includes the

language necessary to:

(1) Mandate TOP participation;

(2) Follow procedures required by

law;

(3) Follow procedures dictated by us

and Treasury; and

(4) Protect the rights of households

and individuals.

However, this does not mean that

State agencies no longer need to follow

these procedures. We will be providing

these procedures (with any revisions) to

41772 Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations

State agencies via memo and similar

formats that can be revised as necessary.

These procedures will also be available

on the Internet, and we welcome the

public’s comments, questions, and

suggestions regarding the procedures.

Our Internet address is http://www.

usda.gov/fns.

We received a total of 43 comments

on TOP. We address all of the

comments, including those dealing with

the prescriptive procedures that we are

not including in this final rule.

Is requiring that State agencies refer all

delinquent claims to TOP inconsistent

with section 13 of the FSA?

The proposed rule states that a State

agency must refer to TOP all claims that

are delinquent for at least six months.

One commenter believes that this is

inconsistent with the FSA. Section

13(b)(1)(C) of the FSA (7 U.S.C.

2022(b)(4)) was amended by PRWORA

to provide Federal salary offset and

FTROP (now rolled into TOP) as

collection methodologies that State

agencies may use. Section 13(b)(4) of the

FSA (7 U.S.C. 2022(b)(4)) was amended

by PRWORA to specify that claims are

to be collected in accordance with ‘‘. . .

requirements established by the State

agency for . . . electing a means of

payment. . . .’’ The commenter believes

that it should be left up to the State

agency to determine what claims should

be submitted to TOP.

We recognize this language exists in

the FSA. However, only delinquent

claims are submitted to TOP. The claim

would not become delinquent if the

State agency was regularly collecting the

claim through the other methods. We

are tasked by section 4(c) of the FSA (7

U.S.C. 2013(c)) to issue regulations

necessary for the effective and efficient

administration of the FSP. TOP has

proved to be a highly effective and

efficient method for collecting

delinquent debts. Therefore, we believe

that it is within our authority to require

that State agencies use TOP for

delinquent claims. The final rule

remains unchanged. (See § 273.18(n)(1)).

Why do we need to refer AE claims for

TOP?

In the proposed rule, claims

delinquent for six months or more,

including AE claims, must be referred

for TOP. One commenter objected to

this requirement. According to the

commenter, we should not penalize

persons who are working and trying to

become self-sufficient by taking their tax

return and other Federal payments to

pay a claim that was the fault of the

State agency.

Even though the State agency made

the mistake, the household still received

more benefits than it was entitled to

receive. Section 13(a)(2) of the FSA (7

U.S.C. 2022(a)(2)) clearly states that any

overpayment should be pursued. This

includes overpayments caused by

agency errors. PRWORA amended

section 13(b) of the FSA (7 U.S.C.

2022(b)) by removing any restrictions

against what involuntary collection

methods can be used against AE claims.

Since only delinquent claims are

referred for TOP, the household has

ample opportunity to make

arrangements to repay the overpayment

prior to the claim becoming delinquent.

Therefore, State agencies must refer AE

claims for TOP.

When must a State agency remove a

debt from the TOP?

Clarification is needed as to when a

debt needs to be removed from the TOP.

We combine the proposed rule with

current policy to reach the following

procedure that is reflected in the final

rule:

You must remove a debt from TOP if

any of the following occurs:

(1) you discover that the debtor is a

member of a food stamp household

undergoing allotment reduction;

(2) the claim is paid up or the claim

is disposed of through a hearing,

termination, compromise or any other

means;

(3) we or Treasury instruct you to

remove the debt;

(4) you discover that the claim was

referred in error; or

(5) you make arrangements with the

household to resume payments.

We strongly believe that it is improper

to keep a debtor in TOP while

simultaneously reducing the

household’s allotment. This is discussed

in the Allotment Reduction section of

this preamble and reflected in

§ 273.18(n)(4) of this final rule.

Can State agencies submit claims for

TOP that are delinquent for less than

180 days?

The proposed rule requires State

agencies to refer all claims that are

delinquent for 180 days or more to TOP.

One State agency proposed that State

agencies be allowed to submit claims

that are delinquent for less than 180

days.

While this recommendation does have

merit, we are hesitant to allow States to

submit claims less than 180 days

delinquent at this time. The reason for

this is that claims referred to TOP incur

various processing and collection

charges that are passed on to the

individual. The six month time frame

provides the household and individuals

with ample opportunity to pay off the

claim without incurring these additional

processing and collection charges. The

rule remains unchanged. (See

§ 273.18(n)(1)).

Doesn’t TOP remove the ability for State

agencies to work with individuals to

persuade them to pay regularly?

One State agency commented that

requiring claims to be referred to TOP

based on our definition of delinquency

would impair its ability to persuade

clients to pay their claim. We disagree.

We believe that, in fact, this will

enhance the State agency’s ability to

secure payment. The threat of referral to

TOP will spur, rather than hamper,

additional collections. In addition, the

State agency is to remove an individual

from TOP if it makes arrangements for

that person resumes repaying the claim.

This is reflected in the final rule at

§ 273.18(n)(4).

How often are State agencies to submit

delinquent claims for TOP?

Section 3716(c)(6) of the DCA requires

that State agencies refer to Treasury all

claims that are delinquent for more than

180 days. Currently, State agencies

submit all delinquent claims at the same

time each year to TOP. The proposed

rule does not provide specific time

frames for this referral. One State agency

asked for flexibility in the time frame for

submitting claims for TOP. The

commenter said that it may be

burdensome to submit these claims all

at once.

We are currently working with

Treasury and State agencies to

determine the optimal time frame for all

agencies involved in this endeavor. We

share the State agency’s concern and

will try to develop flexible procedures.

Our intention is to balance this referral

requirement with a State agency’s

ability to do more frequent submissions.

Since this is a procedural rather than a

regulatory issue, it is not included in

this final rule.

Why can’t State agencies combine

judgment with non-judgment claims

when referring claims to TOP?

A claim reduced to judgment is a

claim that is part of a court order. State

agencies routinely combine claims for

the same individual into one claim for

submittal to TOP. In the proposed rule,

we do not allow State agencies to

combine a claim reduced to judgment

with a claim not reduced to judgment.

The reason for that is the 10-year limit

for referring non-judgment cases.

Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations 41773

Since this issue is procedural in

nature, we are not including this in the

final rule. However, we are currently

working with Treasury and State

agencies to find a way to accommodate

this request.

Do State agencies really need to identify

the type of claim when submitting the

claim for TOP?

We proposed that State identify the

type of claim (IPV, IHE, or AE) when it

is referred to TOP. State agencies need

to identify the type of claim for

retention purposes. Four State agencies

responded by stating that this would be

a burden and, in some cases, system

changes would be needed to comply

with this proposal.

We recognize that this may be a

problem for some State agencies and,

therefore, will not include this as a

requirement for TOP referral. Also,

since this is procedural rather than

regulatory, any further actions regarding

this issue will take place outside the

realm of these regulations.

Are additional review procedures really

needed for salary offset?

In the proposed rule, State agencies

must review the records of individuals

identified as Federal employees to

ensure that the debt is eligible for salary

offset. One State agency did not believe

that this additional review is necessary.

The commenter stated that this activity

is already covered when these claims

are referred for TOP.

The Office of Personnel Management

(OPM) requires that we provide for a

hearing upon request of the employee to

determine whether Federal salary offset

is an appropriate collection method for

this individual. We are currently

working towards streamlining these

procedures as much as possible.

However, since this issue is procedural

rather than regulatory, the specific

procedures will not be included in these

regulations.

How does a request for review affect the

referral process?

The proposed rule allows for a debtor

to request a review before referral of the

debt to TOP. One State agency

commented that the referral process

should not be suspended if the debtor’s

responses are simply complaints or

requests for information. Another State

agency stated that stopping the referral

is a concern because individuals use

this process to circumvent the offset

process.

We recognize the commenters’

concerns and are in the process of

developing a procedure to minimize the

effect that a review request will have on

TOP referrals. Since this is procedural

rather than regulatory, the specific

procedure will not be included in these

regulations.

Why is the 10-year limit for referral

based on the date of the original

demand letter rather than on when the

claim becomes delinquent?

Currently, the 10-year limit for TOP

referral is based on the date of the

original demand letter. One State agency

recommended that we change this to 10

years from the date of last payment. The

10-year limit for referral is to be based

on when the ‘‘right to take action’’ for

the claim began. This limit is a

requirement set forth by Federal law.

The first identifiable ‘‘right to take

action’’ for food stamp recipient claims

is the demand letter. Since this is a TOP

requirement, we have no choice but to

use the limit imposed by Treasury. Also,

since this is a procedural issue, we will

not be addressing it in this final rule.

Do State agencies really need to use the

address provided by Treasury when

notifying debtors of their TOP referral?

The proposed rule requires that State

agencies use a Treasury-provided

address to notice debtors of the

intention to refer a claim to TOP.

Without such an address and notice, the

claim cannot be referred. Currently,

Treasury provides addresses for about

two-thirds of the potential TOP

referrals. Three commenters believe that

this is too restrictive. They believe that

State agencies should be able to access

and use valid addresses from any

reliable source.

Since this issue is procedural, we are

not including it as part of the final rule.

The issue, however, must be resolved.

While we share the commenters’

concern, overriding due process

standards must prevail. Using an

accurate address ensures these due

process standards are met with respect

to being properly delivered. We will

work with State agencies and Treasury

to develop a standard for addresses that

will maximize the number of notices

sent while ensuring that the addresses

are valid.

Since TOP combines FTROP and

Federal salary offset, how do we

combine and reconcile the difference

between the 60-day FTROP notice and

the 30-day Federal salary offset notice?

Currently, we have two different

appeal procedures in place for TOP. For

most of TOP, the debtor receives one

notice and has 60 days to request a

review of the claim. For Federal salary

offset, on the other hand, the debtor

receives a different notice and has 30

days to request a Federal hearing. In the

proposed rule, these two notices are

being combined. Two State agencies

asked how we could resolve the conflict

between the two types of hearings as

well as between the two time frames (60

versus 30 days) allotted for the debtor to

respond.

We recognize this conflict and we are

working to develop procedures to

resolve this situation. These procedures

will be addressed separate from this

final rule. However, the final rule will

safeguard individual rights by

specifying that State agencies must

follow our procedures regarding reviews

and hearings for TOP. (See

§ 273.18(n)(2)(ii)).

What happens when a debtor who is

about to be referred to TOP alleges to

have never received the initial demand

letter?

One recipient interest group believes

that, in cases where a debtor contacts

the State agency and claims he or she

never received the initial demand letter,

the claim should no longer be

considered delinquent. The commenter

also recommends that the individual be

given another opportunity to request a

fair hearing on the merits of the claim.

While we recognize the commenter’s

concern, a competing concern is that

making this a requirement will invite

abuse by some debtors to delay the

process without good cause. Therefore,

we are not including this requirement in

the final rule. However, a State agency

should provide this opportunity for a

debtor where the State agency believes

the debtor’s assertion is justified.

Are we unjustly imposing a burden of

proof on debtors when asking for

documentation to dispute the claim?

One recipient interest group felt that

the proposed rule at

§ 273.18(p)(2)(iv)(C)(3) unjustly places

the burden of proof during a request for

review on the debtor to show that the

claim is not past due or legally

enforceable on the household. That is

not our intention. The request for

review procedure begins with the State

agency initially making the past due and

legally enforceable determination based

on its own records. Once this is done,

the State agency then examines what the

debtor submits for the request for

review. If what the debtor submits does

not show how or why the State agency’s

original determination is wrong, then

the claim is still considered past due

and legally enforceable. We do not

believe that this in any way places an

unreasonable burden on the debtor. We

will, however, revise this language in

our procedures to make this clearer.

41774 Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations

What should be included in the TOP

notice?

The proposed rule contains the

requirements for the TOP notice. We

received 18 comments, mostly from

recipient interest groups, on the

contents of the proposed notice. These

comments are summarized in the

following table:

Comments on TOP notice Number of

commenters

1. Citing the legal authorities serves no purpose .................................................................................................................................... 1

2. Inform debtor to contact State agency if the debtor is participating and can have the claim collected via allotment reduction ....... 1

3. Include the right and opportunity to review applicable records .......................................................................................................... 5

4. List all TOP exemptions and restrictions ............................................................................................................................................ 4

5. Include rights of spouse for joint tax return ........................................................................................................................................ 3

6. Retain information of what is needed when the debtor requests a review ........................................................................................ 1

7. Retain language providing information on the nature of the claim ..................................................................................................... 3

In view of the procedural changes

inherent to TOP, we are not including

in this final rule an actual listing of

exactly what is to be included in the

TOP referral notice. The specific

language will be provided to State

agencies and will also be included on

our aforementioned web page. We will

take all of these comments into

consideration when developing these

procedures. In addition, we encourage

feedback suggestions from State

agencies, debtors and recipient interest

groups once the procedures are released.

What are the changes in transmitting

TOP collections to State agencies?

The proposed rule does not describe

how we are to transmit collections to

State agencies. Two State agencies

disagree with a procedural change that

has recently been implemented. Under

the old method of transferring

collections to State agencies, we

forwarded all TOP collections. At the

end of the quarter, State agencies then

returned about 78 percent of these

collections back to us. (The remaining

22 percent is what the State agencies

collectively retained for collecting the

claim.)

Under the new method, we would

transmit only 35 percent of TOP

collections to the State agency. The 35

percent is the maximum percentage of

collections that can be retained. At the

end of the reporting quarter, the State

agency would then return the remainder

(about one-third of the 35 percent) of

our funds back to us. The remaining

amount, about 22 percent of the total

collection, would be the State retention.

The only change in procedure is in the

actual cash flow. Nothing is changing as

far as the actual retention amounts

received by the State agencies.

The reason for this procedural change

is that the old method for transferring

collections is poor cash management. It

is simply inappropriate to use Federal

funds to provide the State agency with

TOP collections, allow the agency to

float these funds, and then have the

State agency return the same funds to us

at the end of the quarter.

Since this is procedural rather than

regulatory, this procedure is not

included in the regulations.

Doesn’t the new transmission procedure

affect our ability to timely provide

refunds?

Two commenters believed that this

new policy would affect their ability to

timely process refunds. We disagree.

Under the new policy, State agencies

will immediately receive 35 percent of

the amount collected. Refunds reported

to us on the FNS–209 report are only

about 1 percent of collections.

Therefore, we do not believe that this

will affect the State agency’s ability to

provide refunds.

Implementation

PRWORA set August 22, 1996 as the

effective date for the provisions of law

relating to recipient claims. We

proposed that State agencies implement

the discretionary aspects of these

regulations no later than the first day of

the month 180 days after the publication

of the final rule. We received the

following comment on the 180-day

implementation deadline:

Can the implementation deadline be

extended to account for all of the

necessary changes in this rule?

One State agency had a suggestion

that State agencies be given one year to

implement the discretionary changes.

The commenter said that one year

would be needed to make all of the

necessary system changes.

We recognize that the automation

resources of many State agencies are

stretched because of year 2000

considerations. Therefore, we agree with

the State agency. The final rule will

extend the deadline for implementation

of the discretionary changes to the first

day of the month, one year after the

publication of this rule.

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

procedure, Aliens, Claims, Food

Stamps, Fraud, Grant programs—social

programs, Penalties, Reporting and

recordkeeping requirements, Social

security, Students.

Accordingly, 7 CFR parts 272 and 273

are amended as follows:

1. The authority citation for parts 272

and 273 continues to read as follows:

Authority: 7 U.S.C. 2011–2036.

PART 272—REQUIREMENTS FOR

PARTICIPATING STATE AGENCIES

2. In § 272.1, add a new paragraph

(g)(160) to read as follows:

§ 272.1 General terms and conditions.

* * * * *

(g) * * *

(160) Amendment 389. The Personal

Responsibility and Work Opportunity

Reconciliation Act of 1996, Pub. L. 104–

193, (PRWORA) set the date of

enactment, August 22, 1996, as the

effective date for the provisions of the

law relating to recipient claims. These

non-discretionary provisions of this rule

are at § 273.18(c)(1)(ii)(B), § 273.18(f)

and § 273.18(g) and are effective

retroactive to August 22, 1996. The

remaining amendments of this rule are

effective and must be implemented no

later than August 1, 2000.

§ 272.2 [Amended]

3. In § 272.2:

a. Remove the last sentence of

paragraph (a)(2); and

b. Remove paragraph (d)(1)(xii).

§ 272.12 [Removed]

4. Remove § 272.12.

Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations 41775

PART 273—CERTIFICATION OF

ELIGIBLE HOUSEHOLDS

4. In § 273.2, add paragraph (b)(4) to

read as follows:

§ 273.2 Application processing.

* * * * *

(b) Food Stamp application form.

***

(4) Privacy Act statement. As a State

agency, you must notify all households

applying and being recertified for food

stamp benefits of the following:

(i) The collection of this information,

including the social security number

(SSN) of each household member, is

authorized under the Food Stamp Act of

1977, as amended, 7 U.S.C. 2011–2036.

The information will be used to

determine whether your household is

eligible or continues to be eligible to

participate in the Food Stamp Program.

We will verify this information through

computer matching programs. This

information will also be used to monitor

compliance with program regulations

and for program management.

(ii) This information may be disclosed

to other Federal and State agencies for

official examination, and to law

enforcement officials for the purpose of

apprehending persons fleeing to avoid

the law.

(iii) If a food stamp claim arises

against your household, the information

on this application, including all SSNs,

may be referred to Federal and State

agencies, as well as private claims

collection agencies, for claims collection

action.

(iv) The providing of the requested

information, including the SSN of each

household member, is voluntary.

However, failure to provide this

information will result in the denial of

food stamp benefits to your household.

* * * * *

5. Revise § 273.18 to read as follows:

§ 273.18 Claims against households.

(a) General. (1) A recipient claim is an

amount owed because of:

(i) Benefits that are overpaid or

(ii) Benefits that are trafficked.

Trafficking is defined in 7 CFR 271.2.

(2) This claim is a Federal debt

subject to this and other regulations

governing Federal debts. The State

agency must establish and collect any

claim by following these regulations.

(3) As a State agency, you must

develop a plan for establishing and

collecting claims that provides orderly

claims processing and results in claims

collections similar to recent national

rates of collection. If you do not meet

these standards, you must take

corrective action to correct any

deficiencies in the plan.

(4) The following are responsible for

paying a claim:

(i) Each person who was an adult

member of the household when the

overpayment or trafficking occurred;

(ii) A sponsor of an alien household

member if the sponsor is at fault; or

(iii) A person connected to the

household, such as an authorized

representative, who actually trafficks or

otherwise causes an overpayment or

trafficking.

(b) Types of claims. There are three

types of claims:

An . . . is . . .

(1) Intentional Program violation (IPV) claim ..... any claim for an overpayment or trafficking resulting from an individual committing an IPV. An

IPV is defined in § 273.16.

(2) Inadvertent household error (IHE) claim ....... any claim for an overpayment resulting from a misunderstanding or unintended error on the

part of the household.

(3) Agency error (AE) claim ................................ any claim for an overpayment caused by an action or failure to take action by the State agency. The only exception is an overpayment caused by a household transacting an

untampered expired Authorization to Participate (ATP) card.

(c) Calculating the claim amount—(1)

Claims not related to trafficking.

(i) As a State agency, you

must calculate a claim . . . and . . . and . . .

back to at least twelve months prior to when

you become aware of the overpayment.

for an IPV claim, the claim must be calculated

back to the month the act of IPV first occurred.

for all claims, don’t include any amounts that

occurred more than six years before you

became aware of the overpayment.

(ii) The actual steps for calculating a claim are

you . . . unless . . . then . . .

(A) determine the correct amount of benefits for

each month that a household received an

overpayment.

(B) do not apply the earned income deduction

to that part of any earned income that the

household failed to report in a timely manner

when this act is the basis for the claim.

the claim is an AE claim .................................. apply the earned income deduction.

(C) subtract the correct amount of benefits from

the benefits actually received. The answer is

the amount of the overpayment.

this answer is zero or negative ........................ dispose of the claim referral.

(D) reduce the overpayment amount by any

EBT benefits expunged from the household’s

EBT benefit account in accordance with your

own procedures. The difference is the

amount of the claim.

you are not aware of any expunged benefits .. the amount of the overpayment calculated in

paragraph (e)(1)(ii)(C) of this section is the

amount of the claim.

41776 Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations

(2) Trafficking-related claims. Claims

arising from trafficking-related offenses

will be the value of the trafficked

benefits as determined by: (i) The individual’s admission;

(ii) Adjudication; or

(iii) The documentation that forms the

basis for the trafficking determination.

(d) Claim referral management.

(1) As a State agency, you

must . . . and you . . . unless . . .

establish a claim before the last day of the

quarter following the quarter in which the

overpayment or trafficking incident was discovered.

will ensure that no less than 90 percent of all

claim referrals are either established or disposed of according to this time frame.

you develop and use your own standards and

procedures that have been approved by us

(see paragraph (d)(2) of this section).

(2) Instead of using the standard in

paragraph (d)(1) of this section, you may

opt to develop and follow your own

plan for the efficient and effective

management of claim referrals. (i) This plan must be approved by us.

(ii) At a minimum, this plan must

include:

(A) Justification as to why your

standards and procedures will be more

efficient and effective than our claim

referral standard;

(B) Procedures for the detection and

referral of potential overpayments or

trafficking violations;

(C) Time frames and procedures for

tracking claim referrals through date of

discovery to date of establishment; (D) A description of the process to

ensure that these time frames are being

met;

(E) Any special procedures and time

frames for IPV referrals; and

(F) A procedure to track and followup on IPV claim referrals when these

referrals are referred for prosecutorial or

similar action.

(e) Initiating collection action and

managing claims—(1) Applicability.

State agencies must begin collection

action on all claims unless the

conditions under paragraph (g)(2) of this

section apply.

(2) Pre-establishment cost

effectiveness determination. A State

agency may opt not to establish and

subsequently collect an overpayment

that is not cost effective. The following

is our cost-effectiveness policy for State

agencies:

(i) You may follow your own cost effectiveness plan and

opt not to establish any claim if . . . unless . . . or . . .

you determine that the claim referral is not cost

effective to pursue.

you do not have a cost-effectiveness plan approved by us.you already established the claim or discovered the overpayment in a quality control

review.

(ii) Or you may follow the FNS threshold and

opt not to establish any claim if . . . unless . . . or . . .

you determine that the claim referral is $125 or

less.

the household is currently participating in the

Program.

you already established the claim or discovered the overpayment in a quality control

review.

(3) Notification of claim. (i) Each State

agency must develop and mail or

otherwise deliver to the household

written notification to begin collection

action on any claim. (ii) The claim will be considered

established for tracking purposes as of

the date of the initial demand letter or

written notification.

(iii) If the claim or the amount of the

claim was not established at a hearing,

the State agency must provide the

household with a one-time notice of

adverse action. The notice of adverse

action may either be sent separately or

as part of the demand letter.

(iv) The initial demand letter or notice

of adverse action must include

language stating . . .

(A) The amount of the claim.

(B) The intent to collect from all

adults in the household when the

overpayment occurred. (C) The type (IPV, IHE, AE or similar

language) and reason for the claim.

(D) The time period associated with

the claim.

(E) How the claim was calculated.

(F) The phone number to call for more

information about the claim.

(G) That, if the claim is not paid, it

will be sent to other collection agencies,

who will use various collection methods

to collect the claim.

(H) The opportunity to inspect and

copy records related to the claim.

(I) Unless the amount of the claim was

established at a hearing, the opportunity

for a fair hearing on the decision related

to the claim. The household will have

90 days to request a fair hearing.

(J) That, if not paid, the claim will be

referred to the Federal government for

federal collection action.

(K) That the household can make a

written agreement to repay the amount

of the claim prior to it being referred for

Federal collection action.

(L) That, if the claim becomes

delinquent, the household may be

subject to additional processing charges.

(M) That the State agency may reduce

any part of the claim if the agency

believes that the household is not able

to repay the claim.

(N) A due date or time frame to either

repay or make arrangements to repay the

claim, unless the State agency is to

impose allotment reduction.

(O) If allotment reduction is to be

imposed, the percentage to be used and

the effective date.

(v) The due date or time frame for

repayment must be not later than 30

days after the date of the initial written

notification or demand letter.

(vi) Subsequent demand letters or

notices may be sent at the discretion of

the State agency. The language to be

used and content of these letters is left

up to the State agency.

(4) Repayment agreements. (i) Any

repayment agreement for any claim

must contain due dates or time frames

for the periodic submission of

payments.

Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations 41777

(ii) The agreement must specify that

the household will be subject to

involuntary collection action(s) if

payment is not received by the due date

and the claim becomes delinquent.

(5) Determining Delinquency. (i)

Unless specified in paragraph (e)(5)(iv)

of this section, a claim must be

considered delinquent if:

(A) The claim has not been paid by

the due date and a satisfactory payment

arrangement has not been made; or

(B) A payment arrangement has been

established and a scheduled payment

has not been made by the due date.

(ii) The date of delinquency for a

claim covered under paragraph

(e)(5)(i)(A) of this section is the due date

on the initial written notification/

demand letter. The claim will remain

delinquent until payment is received in

full, a satisfactory payment agreement is

negotiated, or allotment reduction is

invoked.

(iii) The date of delinquency for a

claim covered under paragraph

(e)(5)(i)(B) of this section is the due date

of the missed installment payment. The

claim will remain delinquent until

payment is received in full, allotment

reduction is invoked, or if the State

agency determines to either resume or

re-negotiate the repayment schedule.

(iv) A claim will not be considered

delinquent if another claim for the same

household is currently being paid either

through an installment agreement or

allotment reduction and you, as a State

agency, expect to begin collection on the

claim once the prior claim(s) is settled.

(v) A claim is not subject to the

requirements for delinquent debts if the

State agency is unable to determine

delinquency status because collection is

coordinated through the court system.

(6) Fair hearings and claims. (i) A

claim awaiting a fair hearing decision

must not be considered delinquent.

(ii) If the hearing official determines

that a claim does, in fact, exist against

the household, the household must be

re-notified of the claim. The language to

be used in this notice is left up to the

State agency. The demand for payment

may be combined with the notice of the

hearing decision. Delinquency must be

based on the due date of this subsequent

notice and not on the initial pre-hearing

demand letter sent to the household.

(iii) If the hearing official determines

that a claim does not exist, the claim is

disposed of in accordance with

paragraph (e)(8) of this section.

(7) Compromising claims. (i) As a

State agency, you may compromise a

claim or any portion of a claim if it can

be reasonably determined that a

household’s economic circumstances

dictate that the claim will not be paid

in three years.

(ii) You may use the full amount of

the claim (including any amount

compromised) to offset benefits in

accordance with § 273.17.

(iii) You may reinstate any

compromised portion of a claim if the

claim becomes delinquent.

(8) Terminating and writing-off

claims–(i) A terminated claim is a claim

in which all collection action has

ceased. A written-off claim is no longer

considered a receivable subject to

continued Federal and State agency

collection and reporting requirements.

(ii) The following is our claim

termination policy:

As a State agency, if . . . Then you . . . Unless . . .

(A) you find that the claim is invalid ................... must discharge the claim and reflect the event

as a balance adjustment rather than a termination.

it is appropriate to pursue the overpayment as

a different type of claim (e.g., as an IHE

rather than an IPV claim).

(B) all adult household members die ................. must terminate and write-off the claim ............ you plan to pursue the claim against the estate.

(C) the claim balance is $25 or less and the

claim has been delinquent for 90 days or

more.

must terminate and write-off the claim ............ other claims exist against this household resulting in an aggregate claim total of greater than $25.

(D) you determine it is not cost effective to pursue the claim any further.must terminate and write-off the claim ............ we have not approved your overall cost-effectiveness criteria.

(E) the claim is delinquent for three years or

more.

must terminate and write-off the claim ............ you plan to continue to pursue the claim

through Treasury’s Offset Program.

(F) you cannot locate the household ................. may terminate and write-off the claim.

(G) a new collection method or a specific event

(such as winning the lottery) substantially increases the likelihood of further collections.

may reinstate a terminated and written-off

claim.

you decide not to pursue this option.

(f) Acceptable forms of payment.

You may collect a claim by: However . . .

(1) Reducing benefits prior to issuance. This includes allotment reduction and offsets to restored benefits.You must follow the instructions and limits found in paragraphs (g)(1)

and (g)(3) of this section.

(2) Reducing benefits after issuance. These are benefits from electronic benefit transfer (EBT) accounts.You must follow the instructions and limits found in paragraph (g)(2) of

this section.

(3) Accepting cash or any of its generally accepted equivalents. These

equivalents include check, money order, and credit or debit cards.

You do not have to accept credit or debit cards if you do not have the

capability to accept these payments.

(4) Accepting paper food coupons ........................................................... You must destroy any coupons or coupon books that are not returned

to inventory and document as appropriate.

(5) Conducting your own offsets and intercepts. This includes but is not

limited to wage garnishments and intercepts of various State payments. These collections are considered ‘‘cash’’ for FNS claim accounting and reporting purposes.

You must follow any limits that may apply in paragraph (g) of this section.

(6) Requiring the household to perform public service ............................ This form of payment must be ordered by a court and specifically be in

lieu of paying any claim.

(7) Participating in the Treasury collection programs .............................. You must follow the procedures found in paragraph (n) of this section.

41778 Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations

(g) Collection methods. (1) Allotment reduction. The

following is our allotment reduction

policy:

As a State agency, you must . . . Unless . . .

(i) Automatically collect payments for any claim by reducing the amount

of monthly benefits that a household receives.

the claim is being collected at regular intervals at a higher amount or

another household is already having its allotment reduced for the

same claim (see paragraph (g)(1)(vi) of this section).

(ii) For an IPV claim, limit the amount reduced to the greater of $20 per

month or 20 percent of the household’s monthly allotment or entitlement.

the household agrees to a higher amount.

(iii) For an IHE or AE claim, limit the amount reduced to the greater of

$10 per month or 10 percent of the household’s monthly allotment.

the household agrees to a higher amount.

(iv) Not reduce the initial allotment when the household is first certified the household agrees to this reduction.

(v) Not use additional involuntary collection methods against individuals

in a household that is already having its benefit reduced.

the additional payment is voluntary; or the source of the payment is irregular and unexpected such as a State tax refund or lottery

winnings offset.

You may . . .

(vi) Collect using allotment reduction from two separate households for the same claim. However, you are not required to perform this

simultaneous reduction. 

(vii) Continue to use any other collection method against any individual who is not a current member of the household that is undergoing

allotment reduction.

(2) Benefits from EBT accounts. (i) As

a State agency, you must allow a

household to pay its claim using

benefits from its EBT benefit account.

(ii) You must comply with the

following EBT benefit claims collection

and adjustment requirements:

(A) For collecting from active (or reactivated) EBT benefits ...

You . . . or . . . and . . .

need written permission which may be obtained

in advance and done in accordance with

paragraph (g)(2)(iv) of this section;.

oral permission for one time reductions with

you sending the household a receipt of the

transaction within 10 days.

the retention rules do apply to this collection.

(B) For collecting from stale EBT benefits ...

You . . . and . . . and . . .

must mail or otherwise deliver to the household

written notification that you intend to apply

the benefits to the outstanding claim.

give the household at least 10 days to notify

you that it doesn’t want to use these benefits to pay the claim.

the retention rules apply to this collection.

(C) For making an adjustment with expunged EBT benefits ...

You . . . and . . . and . . .

must adjust the amount of any claim by subtracting any expunged amount from the EBT

benefit account for which you become aware.

this can be done anytime ................................ the retention rules do not apply to this adjustment.

(iii) A collection from an EBT account

must be non-settling against the benefit

drawdown account.

(iv) At a minimum, any written

agreement with the household to collect

a claim using active EBT benefits must

include:

(A) A statement that this collection

activity is strictly voluntary;

(B) The amount of the payment;

(C) The frequency of the payments

(i.e., whether monthly or one time only);

(D) The length (if any) of the

agreement; and

(E) A statement that the household

may revoke this agreement at any time.

(3) Offsets to restored benefits. You

must reduce any restored benefits owed

to a household by the amount of any

outstanding claim. This may be done at

any time during the claim establishment

and collection process.

(4) Lump sum payments. You must

accept any payment for a claim whether

it represents full or partial payment. The

payment may be in any of the

acceptable formats.

(5) Installment payments. (i) You may

accept installment payments made for a

claim as part of a negotiated repayment

agreement.

(ii) As a household, if you fail to

submit a payment in accordance with

the terms of your negotiated repayment

schedule, your claim becomes

delinquent and it will be subject to

additional collection actions.

(6) Intercept of unemployment

compensation benefits. (i) As a State

agency, you may arrange with a liable

individual to intercept his or her

unemployment compensation benefits

for the collection of any claim. This

collection option may be included as

part of a repayment agreement.

(ii) You may also intercept an

individual’s unemployment

compensation benefits by obtaining a

court order.

(iii) You must report any intercept of

unemployment compensation benefits

Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations 41779

as ‘‘cash’’ payments when they are

reported to us.

(7) Public service. If authorized by a

court, the value of a claim may be paid

by the household performing public

service. As a State agency, you will

report these amounts in accordance

with our instructions.

(8) Other collection actions. You may

employ any other collection actions to

collect claims. These actions include,

but are not limited to, referrals to

collection and/or other similar private

and public sector agencies, state tax

refund and lottery offsets, wage

garnishments, property liens and small

claims court.

(9) Unspecified joint collections.

When an unspecified joint collection is

received for a combined public

assistance/food stamp recipient claim,

each program must receive its pro rata

share of the amount collected. An

unspecified joint collection is when

funds are received in response to

correspondence or a referral that

contained both the food stamp and other

program claim(s) and the debtor does

not specify to which claim to apply the

collection.

(h) Refunds for overpaid claims. (1)

As a household, if you overpay a claim,

the State agency must provide a refund

for the overpaid amount as soon as

possible after the State agency finds out

about the overpayment. You will be

paid by whatever method the State

agency deems appropriate considering

the circumstances.

(2) You are not entitled to a refund if

the overpaid amount is attributed to an

expunged EBT benefit.

(i) Interstate claims collection. (1)

Unless a transfer occurs as outlined in

paragraph (i)(2) of this section, as a State

agency, you are responsible for

initiating and continuing collection

action on any food stamp recipient

claim regardless of whether the

household remains in your State.

(2) You may accept a claim from

another State agency if the household

with the claim moves into your State.

Once you accept this responsibility, the

claim is yours for future collection and

reporting. You will report interstate

transfers to us in accordance with our

instructions.

(j) Bankruptcy. A State agency may

act on our behalf in any bankruptcy

proceeding against a bankrupt

household with outstanding recipient

claims.

(k) Retention rates. (1) The retention

rates for State agencies are as follows:

If you collect an . . . then the retention rate is

...

(i) IPV claim .................................................................................................................................................................... 35 percent.

(ii) IHE claim ................................................................................................................................................................... 20 percent.

(iii) IHE claim by reducing a person’s unemployment compensation benefit ................................................................ 35 percent.

(iv) AE claim ................................................................................................................................................................... nothing.

(2) These rates do not apply to any

reduction in benefits when you

disqualify someone for an IPV.

(l) Submission of payments to us. A

State agency must send us the value of

funds collected for IHE, IPV or AE

claims according to our instructions. We

must pay you for claims collection

retention by electronic funds transfer.

(m) Accounting procedures. (1) As a

State agency, you must maintain an

accounting system for monitoring

recipient claims against households.

This accounting system shall consist of

both the system of records maintained

for individual debtors and the accounts

receivable summary data maintained for

these debts.

(2) At a minimum, the accounting

system must document the following for

each claim:

(i) The date of discovery;

(ii) The reason for the claim;

(iii) The calculation of the claim;

(iv) The date you established the

claim;

(v) The methods used to collect the

claim;

(vi) The amount and incidence of any

claim processing charges;

(vii) The reason for the final

disposition of the claim;

(viii) Any collections made on the

claim;

(ix) Any correspondence, including

follow-up letters, sent to the household.

(3) At a minimum, your accounting or

certification system must also identify

the following for each claim:

(i) Those households whose claims

have become delinquent;

(ii) Those situations in which an

amount not yet restored to a household

can be used to offset a claim owed by

the household; and

(iii) Those households with

outstanding claims that are applying for

benefits.

(4) When requested and at intervals

determined by us, your accounting

system must also produce:

(i) Accurate and supported

outstanding balances and collections for

established claims; and

(ii) Summary reports of the funds

collected, the amount submitted to FNS,

the claims established and terminated,

any delinquent claims processing

charges, the uncollected balance and the

delinquency of the unpaid debt.

(5) On a quarterly basis, unless

otherwise directed by us, your

accounting system must reconcile

summary balances reported to

individual supporting records.

(n) Treasury’s Offset Programs (TOP).

(1) Referring debts to TOP. (i) As a

State agency, you must refer to TOP all

recipient claims that are delinquent for

180 or more days.

(ii) You must certify that all of these

claims to be referred to TOP are 180

days delinquent and legally enforceable.

(iii) You must refer these claims in

accordance with our and the

Department of the Treasury’s (Treasury)

instructions.

(iv) You must not refer claims to TOP

that:

(A) You become aware that the debtor

is a member of a participating

household that is having its allotment

reduced to collect the claim; or

(B) Fall into any other category

designated by us as non-referable to

TOP.

(2) Notifying debtors of referral to

TOP. (i) As a State agency, you must

notify the debtor of the impending

referral to TOP according to our

instructions relating to:

(A) What constitutes an adequate

address to send the notice;

(B) What specific language will be

included in the TOP referral notice;

(C) What will be the appropriate time

frames and appeal rights; and

(D) Any other information that we

determine necessary to fulfill all due

process and other legal requirements as

well as to adequately inform the debtor

of the impending action.

(ii) You must also follow our

instructions regarding procedures

connected with responding to inquiries,

subsequent reviews and hearings, and

any other procedures determined by us

as necessary in the debtor notification

process.

(3) Effect on debtors. (i) If you, as a

debtor, have your claim referred to TOP,

41780 Federal Register / Vol. 65, No. 130 / Thursday, July 6, 2000 / Rules and Regulations

any eligible Federal payment that you

are owed may be intercepted through

TOP.

(ii) You may also be responsible for

paying any collection or processing fees

charged by the Federal government to

intercept your payment.

(4) Procedures when a claim is in

TOP. (i) As a State agency, you must

follow FNS and Treasury procedures

when the claim is in TOP.

(ii) You must remove a claim from

TOP if:

(A) FNS or Treasury instruct you to

remove the debt; or

(B) You discover that:

(1) The debtor is a member of a food

stamp household undergoing allotment

reduction;

(2) The claim is paid up;

(3) The claim is disposed of through

a hearing, termination, compromise or

any other means;

(4) The claim was referred to TOP in

error; or

(5) You make an arrangement with the

debtor to resume payments.

(5) Receiving and reporting. As a State

agency, you must follow our procedures

on receiving and reporting TOP

payments.

(6) Security or confidentiality

agreements. As a State agency, you must

follow our procedures regarding any

security or confidentiality agreements or

processes necessary for TOP

participation.

Dated: June 21, 2000.

Shirley R. Watkins,

Under Secretary, Food, Nutrition and

Consumer Services.

[FR Doc. 00–16775 Filed 7–5–00; 8:45 am]

BILLING CODE 3410–30–P