[Federal Register Volume 62, Number 57 (Tuesday, March 25, 1997)]
[Notices]
[Pages 14110-14112]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-7453]


-----------------------------------------------------------------------


DEPARTMENT OF AGRICULTURE

Food Stamp Program, Regulatory Review: Food Stamp Electronic 
Benefit Transfer (EBT) Systems--Interoperability

AGENCY: Food and Consumer Service, USDA.

ACTION: Notice: Request for Information.

-----------------------------------------------------------------------

SUMMARY: The Department is reviewing policy and seeking information 
related to interoperable food stamp EBT systems. In particular, the 
Department is asking for information on the costs and transaction fees 
that are now or may in the future be associated with food stamp EBT 
interoperability, as well as any

[[Page 14111]]

additional information that should be considered within the scope of 
this review.

DATES: Comments must be received on or before May 27, 1997 to be 
assured of consideration.

ADDRESSES: Comments should be submitted to Jeffrey N. Cohen, Chief, 
Electronic Benefit Transfer Branch, Benefit Redemption Division, Food 
and Consumer Service, USDA, Room 718, 3101 Park Center Drive, 
Alexandria, Virginia 22302. Comments may also be datafaxed to the 
attention of Mr. Cohen at (703) 605-0232. All written comments will be 
open for public inspection at the office of the Food and Consumer 
Service during regular business hours (8:30 a.m. to 5 p.m., Monday 
through Friday) at the above indicated address.

FOR FURTHER INFORMATION CONTACT: Questions regarding this solicitation 
for comments should be addressed to Mr. Cohen at the above address or 
by telephone at (703) 305-2517.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This Notice has been reviewed under Executive Order 12866 and has 
been classified not major. This Notice will not have an annual effect 
of $100 million or more, nor will it cause a major increase in costs or 
prices for consumer, individual industries, Federal, State or local 
government agencies, or geographic regions. This notice will not have 
significant adverse effects on competition, employment, investment, 
productivity, innovation, or on the ability of U.S.-based enterprise to 
compete with foreign-based enterprises in domestic or export markets.

Executive Order 12372

    The Food Stamp Program is listed in the Catalog of Federal Domestic 
Assistance under No. 10.551. For the reasons set forth in the final 
rule in 7 CFR 3015, Subpart V and related Notice (48 FR 29115), this 
Program is excluded from the scope of Executive Order 12372 which 
requires intergovernmental consultation with State and local officials.

Regulatory Flexibility Act

    This action is not a rule as defined by the Regulatory Flexibility 
Act of 1980 (5 U.S.C. 601-612) and thus is exempt from the provisions 
of the Act.

Paperwork Reduction Act

    This Notice does not contain reporting or recordkeeping 
requirements subject to approval by the Office of Management and Budget 
(OMB) under the Paperwork Reduction Act of 1980 (44 U.S.C. 3507).

Executive Order 12988

    This Notice has been reviewed under Executive Order 12988, Civil 
Justice Reform and found to be exempt from its provisions.

Background

    The Food and Consumer Service has actively supported the 
implementation of Electronic Benefit Transfer (EBT) systems by State 
agencies to issue and redeem food stamp benefits. To date, 18 State 
agencies operate food stamp EBT systems (along with other cash 
programs), eight of which are statewide operations. During the next two 
years, it is estimated that more than half the States will be operating 
food stamp EBT systems. Recently passed legislation mandates 
implementation of EBT systems for the Food Stamp Program by the year 
2002.
    As defined in the Food Stamp EBT regulations at 7 CFR 274.12, State 
agencies are required to provide the necessary point-of-sale (POS) 
equipment, telecommunications and other support to each authorized food 
stamp retailer at no cost. This State-provided POS equipment may be 
used solely for the Food Stamp Program and other welfare programs. When 
a retailer chooses to use its own commercial POS equipment, the State 
agency (or their EBT contractor) must be prepared to interface with 
that store's equipment. Any costs associated with the interface may be 
negotiated between the State and the retailers.
    The Food Stamp EBT regulations also require State agencies to 
assess food stamp household access needs and equip those food retailers 
across project borders that are necessary for household access to their 
food stamp benefits. The State agencies have the flexibility to 
determine the access criteria. For other non-State retailers who desire 
access, the State agencies are encouraged to negotiate with these 
retailers to allow them to participate in their system. The specific 
terms for participation have differed across States and may involve 
leasing any necessary POS equipment, equipment purchases, and/or 
payment of transaction fees. All terms are negotiated with each 
retailer. These current retailer interoperability policies are designed 
to strike a balance between ensuring adequate retailer and recipient 
access, on one hand, and maximizing state flexibility and minimizing 
EBT costs on the other.
    Extending access beyond the immediate borders of the States where 
current systems operate is only beginning to be addressed by States. 
The States of Texas and New Mexico, for example, have developed the 
capability to exchange transactions with one another. As more State 
agencies implement EBT systems, access to benefits beyond the immediate 
borders of a State is becoming an important issue. Food retailers that 
operate stores in several States have expressed a desire to have 
interoperability much like the coupon system. They argue that such 
interoperability would provide greater access to their goods.
    In part to facilitate interoperability and address retailer 
concerns regarding standardization of EBT systems, EBT Operating Rules 
have been developed by State agencies, food retailers, financial 
institutions, networks and others under the auspices of the National 
Automated Clearing House Association (NACHA). NACHA established an EBT 
Council to complete these national Operating Rules and have adopted 
them under the QUEST service mark. The QUEST Operating Rules define the 
responsibilities of retailers, financial institutions, networks and 
commercial third party providers in an interoperable EBT environment. 
By definition, these rules require retailers participating in the QUEST 
system to provide access to all QUEST cards and require States to 
arrange for their cards to be accessible at any POS or ATM terminal 
that displays the QUEST service mark. Several State agencies have 
elected to require use of the QUEST Operating Rules by their EBT 
contractor.
    Recent proposals by EBT contractors have offered to meet the State 
agencies' requirements for QUEST interoperability through an EBT 
gateway or switch. The gateway would have the capability of switching a 
food stamp purchase or credit transaction to the correct EBT processor 
for authorization. Third party processors servicing food retailers for 
commercial debit or credit could connect to this single point, the 
gateway, and thus provide interoperability to their retailer customers 
for any food stamp card presented at the checkout lane. Any store, 
regardless of its location or the State card being presented, would 
thereby be able to accept any QUEST transaction. However, the providers 
of this service argue that this capability comes at a cost and have 
proposed to charge a gateway fee to retailers or their service 
providers for this switching service. The precise fee amount or who 
will pay this fee is still being discussed by the affected parties. The 
appropriateness of these fees is still being questioned as well. The

[[Page 14112]]

Department has been requested by both State agencies and retailers to 
establish policy in this area.

Requested Information

    In light of the discussions that continue to take place, the 
Department is interested in obtaining information. Interoperability is 
recognized as being good for recipients and good for retailers, but it 
would appear to raise costs. We want to learn more about these costs: 
the nature of these costs and to what degree they will appear. Towards 
that end, the Department wishes to obtain input regarding the 
anticipated frequency of interoperable food stamp transactions, the 
relative costs to provide interoperability, and who might best bear the 
costs. More formally stated:
    (1) How many interstate transactions are expected to occur and how 
often will they occur?
    (2) Should interoperability between State EBT systems be required?
    (3) What are the interstate costs and the factors that make up 
those costs?
    Comments are encouraged on these specific issues proposed for 
consideration as well as any additional issues that should be 
considered within the scope of this review. Comments will assist the 
Department in determining whether policy changes are appropriate.

    Dated: March 11, 1997.
William E. Ludwig,
Administrator, Food and Consumer Service.
[FR Doc. 97-7453 Filed 3-24-97; 8:45 am]
BILLING CODE 3410-30-U