II

103D CONGRESS

1ST SESSION S. 1646

To amend the Food Stamp Act of 1977 to reduce food stamp fraud and

improve the food stamp program, and for other purposes.

IN THE SENATE OF THE UNITED STATES

NOVEMBER 8 (legislative day, NOVEMBER 2), 1993

Mr. LEAHY introduced the following bill; which was read twice and referred

to the Committee on Agriculture, Nutrition, and Forestry

A BILL

To amend the Food Stamp Act of 1977 to reduce food

stamp fraud and improve the food stamp program, and

for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Food Stamp Fraud

5 Reduction Act of 1993’’.

6 SEC. 2. FINDINGS.

7 (a) MAKING GOVERNMENT WORK FINDINGS.—In the

8 findings of the report entitled ‘‘Making Government

9 Work’’ regarding the electronic benefits transfer of food
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1 stamps and other government benefits, the Office of Tech2 nology Assessment found that—

3 (1) by eliminating cash change and reducing

4 the opportunity for trafficking in benefits, a nation5 wide electronic benefits transfer system might re6 duce levels of food stamp benefit diversion by as

7 much as 80 percent;

8 (2) electronic benefits transfer is likely to re9 duce theft and fraud, as well as reduce errors, pa10 perwork, delays, and the stigma attached to food

11 stamp coupons;

12 (3) Congress and the President need to act

13 quickly on electronic benefits transfer if opportuni14 ties for integrating services and capturing economies

15 of scale are to be realized;

16 (4) electronic benefits transfer is proven, reli17 able, and easy to use;

18 (5) electronic benefits transfer can yield signifi19 cant cost savings to retailers, recipients, financial in20 stitutions, and government agencies;

21 (6) recipients, retailers, financial institutions,

22 and local program administrators who have tried

23 electronic benefits transfer prefer electronic benefits

24 transfer to coupons; and
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1 (7) food stamp recipients using electronic bene2 fits transfer experience an added sense of dignity

3 and security.

4 (b) OTHER FINDINGS.—Congress finds that—

5 (1) the food stamp program prints more than

6 375,000,000 food stamp booklets per year, including

7 2,500,000,000 paper coupons;

8 (2) food stamp coupons (except for $1 coupons)

9 are used once, and each 1 of the over 2,000,000,000

10 coupons per year is then counted, canceled, shipped,

11 redeemed through the banking system by the Sec12 retary of the Treasury, stored, and destroyed;

13 (3) food stamp recipients can receive cash

14 change in food stamp transactions if the cash does

15 not exceed $1 per purchase; and

16 (4) the printing, distribution, handling, and re17 demption of coupons costs at least $60,000,000 per

18 year.

19 SEC. 3. ELIMINATION OF FOOD STAMP COUPONS.

20 Section 4 of the Food Stamp Act of 1977 (7 U.S.C.

21 2013) is amended by adding at the end the following new

22 subsection:

23 ‘‘(d)(1) Except as provided in paragraph (2) and not24 withstanding any other provision of this Act, effective be25 ginning on the date that is 3 years after the date of enact-
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1 ment of this subsection, no State may participate in the

2 food stamp program if the State issues or uses food stamp

3 coupons to carry out the program.

4 ‘‘(2) Paragraph (1) shall not apply to the extent

5 that—

6 ‘‘(A) a use of food stamp coupons is specifically

7 authorized by section 7; or

8 ‘‘(B) the Secretary grants a waiver to a State

9 to delay implementation of electronic benefits trans10 fer for good cause shown by the State.’’.

11 SEC. 4. NATIONWIDE ELECTRONIC BENEFITS TRANSFER

12 FEASIBILITY TEST.

13 (a) IN GENERAL.—The Secretary of Agriculture, in

14 coordination with the Secretary of the Treasury and the

15 Secretary of Health and Human Services, shall conduct

16 a nationwide coordinated feasibility test to—

17 (1) more fully evaluate technological options, in18 cluding on-line, off-line, and hybrid electronic bene19 fits transfer technologies, for replacing paper food

20 stamp coupons with electronic benefits transfer

21 systems;

22 (2) examine the advantages and disadvantages

23 of centralized, as opposed to decentralized, electronic

24 benefits transfer systems;
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1 (3) determine the degree to which a nationwide

2 electronic benefits transfer system could be inte3 grated with commercial networks;

4 (4) ascertain the likely impact of a nationwide

5 electronic benefits transfer system on recipients,

6 State agencies, and local food stamp offices;

7 (5) examine the likely impact of a nationwide

8 electronic benefits transfer system on the banking

9 and retail food industries; and

10 (6) examine means of using laser scanner tech11 nology with electronic benefits transfer technology so

12 that only eligible food items can be purchased by

13 food stamp participants in stores that use scanners.

14 (b) INITIAL REPORT.—Not later than 290 days after

15 the date of enactment of this Act, the Secretary of Agri16 culture, in coordination with the Secretary of the Treasury

17 and the Secretary of Health and Human Services, shall

18 report to the appropriate committees of Congress on—

19 (1) means of ensuring the confidentiality of per20 sonal information in electronic benefits transfer sys21 tems and the applicability of section 552a of title 5,

22 United States Code, to electronic benefits transfer

23 systems;

24 (2) the need for regulations to coordinate the

25 electronic benefits transfer systems of agencies to
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1 maximize the cost savings of electronic benefits

2 transfer technology for Federal programs;

3 (3) the need for the National Institute of

4 Standards and Technology to develop standards for

5 card and terminal manufacture and standards for

6 other aspects of electronic benefits transfer

7 technology;

8 (4) the best approaches for maximizing the use

9 of then current point of sale terminals and systems

10 to reduce the costs of implementing a nationwide

11 electronic benefits transfer system; and

12 (5) the best approaches for maximizing the use

13 of electronic benefits transfer systems for multiple

14 Federal benefit programs so as to achieve the high15 est cost savings possible through the implementation

16 of electronic benefits transfer systems.

17 (c) TWO-YEAR REPORT.—Not later than 2 years

18 after the date of enactment of this Act, the Secretary of

19 Agriculture shall report to the appropriate committees of

20 Congress on the results of the feasibility test conducted

21 under subsection (a).

22 SEC. 5. IMPLEMENTATION OF NATIONWIDE ELECTRONIC

23 BENEFITS TRANSFER SYSTEM.

24 Section 7 of the Food Stamp Act of 1977 (7 U.S.C.

25 2016) is amended—
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1 (1) in subsection (i)(2)(A), by inserting after

2 ‘‘startup costs’’ the following: ‘‘less estimated sav3 ings achieved by reductions in fraud and other diver4 sions of benefits’’; and

5 (2) by adding at the end the following new sub6 section:

7 ‘‘(j)(1)(A) The Secretary shall coordinate with, and

8 assist, each State agency in the conversion from use of

9 coupons to electronic benefits transfer technology.

10 ‘‘(B) The Secretary shall assist stores located in very

11 rural areas, stores without access to electricity or regular

12 telephone service, and farmers’ markets that are author13 ized to accept coupons to continue to participate in the

14 food stamp program after the conversion to electronic ben15 efits transfer technology.

16 ‘‘(C) The Secretary may permit the use of coupons

17 or other means of providing benefits to food stamp house18 holds that use stores or markets described in subpara19 graph (B).

20 ‘‘(D) The Secretary shall waive the application of any

21 other provision of this Act, to the extent the waiver is nec22 essary to carry out subparagraphs (B) and (C).

23 ‘‘(2) Not later than 18 months after the date of en24 actment of Food Stamp Fraud Reduction Act of 1993,

25 the Secretary shall—
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1 ‘‘(A) determine whether using the then current

2 Food and Nutrition Service regions, or other re3 gional configurations of State agencies, would be the

4 most cost-effective means of establishing a nation5 wide electronic benefits transfer system; and

6 ‘‘(B) report to the appropriate committees of

7 Congress on the determination made under subpara8 graph (A).

9 ‘‘(3) Not later than 30 months after the date of en10 actment of Food Stamp Fraud Reduction Act of 1993,

11 the Secretary shall publish proposed regulations setting

12 forth the rules and procedures for a nationwide electronic

13 benefits transfer system to carry out the food stamp pro14 gram.

15 ‘‘(4)(A) Not later than 3 years after the date of en16 actment of Food Stamp Fraud Reduction Act of 1993,

17 subject to subparagraph (B), the Secretary shall require,

18 by regulation, a nationwide electronic benefits transfer

19 system to carry out the food stamp program.

20 ‘‘(B) In establishing the system required under sub21 paragraph (A), the Secretary—

22 ‘‘(i) shall take into account the results of the

23 test, determination, and reports made under section

24 4 of the Food Stamp Fraud Reduction Act of 1993

25 and paragraph (2);
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1 ‘‘(ii) may establish a national, regional, or State

2 system;

3 ‘‘(iii) may use on-line, off-line, or hybrid elec4 tronic benefits transfer technologies;

5 ‘‘(iv) may waive the application of any other

6 provision of this Act to the extent the waiver is nec7 essary to carry out this paragraph, except that

8 household eligibility and benefit levels may not be re9 duced as a result of a waiver; and

10 ‘‘(v) shall ensure that a personal identification

11 number is issued with each electronic benefits trans12 fer card in order to help protect the integrity of the

13 food stamp program.

14 ‘‘(C) The regulations required under subparagraph

15 (A) shall set forth standards regarding—

16 ‘‘(i) the required level of recipient protection re17 garding privacy, ease of use, and access to and serv18 ice in retail food stores;

19 ‘‘(ii) the terms and conditions of participation

20 by retail food stores, financial institutions, and other

21 appropriate parties;

22 ‘‘(iii) system security;

23 ‘‘(iv) system transaction interchange, reliability,

24 and processing speeds;

25 ‘‘(v) financial accountability;
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1 ‘‘(vi) the required testing of system operations

2 prior to implementation; and

3 ‘‘(vii) rules prohibiting store participation un4 less any special equipment necessary to permit

5 households to purchase food with the benefits issued

6 under this Act is operational—

7 ‘‘(I) in the case of a participating retail

8 food store in which benefits are used to pur9 chase 15 percent or more of the total dollar

10 amount of food sold by the store (as determined

11 by the Secretary), at all registers in the store;

12 and

13 ‘‘(II) in the case of other participating

14 stores, at a sufficient number of registers to

15 provide service that is comparable to service

16 provided individuals who are not members of

17 food stamp households, as determined by the

18 Secretary.

19 ‘‘(D) Administrative costs incurred in connection with

20 activities under this subsection shall be eligible for reim21 bursement in accordance with section 16, subject to the

22 limitations in section 16(g).’’.

23 SEC. 6. CONFORMING AMENDMENTS.

24 (a) Section 3 of the Food Stamp Act of 1977 (42

25 U.S.C. 2012) is amended—
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1 (1) in subsection (a), by striking ‘‘coupons’’ and

2 inserting ‘‘benefits’’;

3 (2) in the first sentence of subsection (c), by

4 striking ‘‘authorization cards’’ and inserting ‘‘allot5 ments’’;

6 (3) in subsection (d), by striking ‘‘the provi7 sions of this Act’’ and inserting ‘‘section 7(g)’’;

8 (4) in subsection (e)—

9 (A) by striking ‘‘Coupon issuer’’ and in10 serting ‘‘Benefit issuer’’; and

11 (B) by striking ‘‘coupons’’ and inserting

12 ‘‘benefits’’;

13 (5) in the last sentence of subsection (i), by

14 striking ‘‘coupons’’ and inserting ‘‘allotments’’; and

15 (6) by adding at the end the following new sub16 section:

17 ‘‘(u) ‘Electronic benefits transfer card’ means a card

18 issued to a household participating in the program that

19 is used to purchase food.’’.

20 (b) Section 4(a) of such Act (7 U.S.C. 2013(a)) is

21 amended—

22 (1) in the first and second sentences, by strik23 ing ‘‘coupons’’ each place it appears and inserting

24 ‘‘electronic benefits transfer cards or coupons’’; and
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1 (2) by striking the third sentence and inserting

2 the following new sentence: ‘‘The Secretary, through

3 the facilities of the Treasury of the United States,

4 shall reimburse the stores for food purchases made

5 with electronic benefits transfer cards or coupons

6 provided under this Act.’’.

7 (c) The first sentence of section 6(b)(1) of such Act

8 (7 U.S.C. 2015(b)(1)) is amended—

9 (1) by striking ‘‘coupons or authorization

10 cards’’ and inserting ‘‘electronic benefits transfer

11 cards, coupons, or authorization cards’’; and

12 (2) in clauses (ii) and (iii), by inserting ‘‘or

13 electronic benefits transfer cards’’ after ‘‘coupons’’

14 each place it appears.

15 (d) Section 7 of such Act (7 U.S.C. 2016) is amend16 ed—

17 (1) by striking the section heading and insert18 ing the following new section heading:

19 ‘‘ISSUANCE AND USE OF ELECTRONIC BENEFITS

20 TRANSFER CARDS OR COUPONS’’;

21 (2) in subsection (a), by striking ‘‘Coupons’’

22 and all that follows through ‘‘necessary, and’’ and

23 inserting ‘‘Electronic benefits transfer cards or cou24 pons’’;

25 (3) in subsection (b), by striking ‘‘Coupons’’

26 and inserting ‘‘Electronic benefits transfer cards’’;
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1 (4) in subsection (f)—

2 (A) by striking ‘‘issuance of coupons’’ and

3 inserting ‘‘issuance of electronic benefits trans4 fer cards or coupons’’;

5 (B) by striking ‘‘coupon issuer’’ and insert6 ing ‘‘electronic benefits transfer or coupon is7 suer’’; and

8 (C) by striking ‘‘coupons and allotments’’

9 and inserting ‘‘electronic benefits transfer

10 cards, coupons, and allotments’’;

11 (5) by striking subsections (g) through (i); and

12 (6) by redesignating subsection (j) (as added by

13 section 5(2)) as subsection (g).

14 (e) Section 8(b) of such Act (7 U.S.C. 2017(b)) is

15 amended by striking ‘‘coupons’’ and inserting ‘‘electronic

16 benefits transfer cards or coupons’’.

17 (f) Section 9 of such Act (7 U.S.C. 2018) is amend18 ed—

19 (1) in subsections (a) and (b), by striking ‘‘cou20 pons’’ each place it appears and inserting ‘‘coupons,

21 or accept electronic benefits transfer cards,’’; and

22 (2) in subsection (a)(1)(B), by striking ‘‘coupon

23 business’’ and inserting ‘‘electronic benefits transfer

24 cards and coupon business’’.
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1 (g) The first sentence of section 10 of such Act (7

2 U.S.C. 2019) is amended—

3 (1) by inserting after ‘‘provide for’’ the follow4 ing: ‘‘reimbursing stores for purchases made with

5 electronic benefits transfer cards and for’’; and

6 (2) by inserting after ‘‘food coupons’’ the fol7 lowing: ‘‘or use their members’ electronic benefits

8 transfer cards’’.

9 (h) Section 11 of such Act (7 U.S.C. 2020) is amend10 ed—

11 (1) in the first sentence of subsection (a), by

12 striking ‘‘coupons’’ and inserting ‘‘electronic benefits

13 transfer cards or coupons,’’;

14 (2) in subsection (e)—

15 (A) in paragraph (2)—

16 (i) by striking ‘‘a coupon allotment’’

17 and inserting ‘‘an allotment’’; and

18 (ii) by striking ‘‘issuing coupons’’ and

19 inserting ‘‘issuing electronic benefits trans20 fer cards or coupons’’;

21 (B) in paragraph (7), by striking ‘‘coupon

22 issuance’’ and inserting ‘‘electronic benefits

23 transfer card or coupon issuance’’;

24 (C) in paragraph (8)(C), by striking ‘‘cou25 pons’’ and inserting ‘‘benefits’’;
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1 (D) in paragraph (9), by striking ‘‘cou2 pons’’ each place it appears and inserting ‘‘elec3 tronic benefits transfer cards or coupons’’;

4 (E) in paragraph (11), by striking ‘‘in the

5 form of coupons’’;

6 (F) in paragraph (16), by striking ‘‘cou7 pons’’ and inserting ‘‘electronic benefits trans8 fer card or coupons’’;

9 (G) in paragraph (20)—

10 (i) by striking ‘‘their coupons’’ and in11 serting ‘‘the electronic benefits transfer

12 cards or coupons of the households’’;

13 (ii) by striking ‘‘a coupon issuer’’ and

14 inserting ‘‘an electronic benefits transfer

15 card or a coupon issuer’’; and

16 (iii) by striking ‘‘face value of any

17 coupons’’ and inserting ‘‘value of any bene18 fits or coupons’’;

19 (H) in paragraph (21), by striking ‘‘cou20 pons’’ and inserting ‘‘electronic benefits trans21 fer cards or coupons’’;

22 (I) in paragraph (24), by striking ‘‘cou23 pons’’ and inserting ‘‘benefits’’; and
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1 (J) in paragraph (25), by striking ‘‘cou2 pons’’ each place it appears and inserting ‘‘elec3 tronic benefits transfer cards or coupons’’; and

4 (3) in subsection (h), by striking ‘‘face value of

5 any coupon or coupons’’ and inserting ‘‘value of any

6 benefits or coupons’’.

7 (i) Section 12 of such Act (7 U.S.C. 2021) is amend8 ed—

9 (1) in subsection (b)(3), by striking ‘‘coupons’’

10 each place it appears and inserting ‘‘electronic bene11 fits transfer cards or coupons’’;

12 (2) in subsection (d)—

13 (A) in the first sentence—

14 (i) by inserting after ‘‘redeem cou15 pons’’ the following: ‘‘and to accept elec16 tronic benefits transfer cards’’; and

17 (ii) by striking ‘‘value of coupons’’

18 and inserting ‘‘value of benefits and cou19 pons’’; and

20 (B) in the third sentence, by striking ‘‘cou21 pons’’ each place it appears and inserting ‘‘cou22 pons or benefits’’; and

23 (3) in the first sentence of subsection (f)—

24 (A) by inserting after ‘‘to accept and re25 deem food coupons’’ the following: ‘‘electronic
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1 benefits transfer cards, or to accept and redeem

2 food coupons,’’; and

3 (B) by inserting before the period at the

4 end the following: ‘‘or program benefits’’.

5 (j) Section 13 of such Act (7 U.S.C. 2022) is amend6 ed by striking ‘‘coupons’’ each place it appears ’’ and in7 serting ‘‘benefits’’.

8 (k) Section 15 of such Act (7 U.S.C. 2024) is amend9 ed—

10 (1) in subsection (a), by striking ‘‘issuance or

11 presentment for redemption’’ and inserting ‘‘issu12 ance, presentment for redemption, or use of elec13 tronic benefits transfer cards or’’;

14 (2) in the first sentence of subsection (b)(1)—

15 (A) by inserting after ‘‘coupons, authoriza16 tion cards,’’ each place it appears the following:

17 ‘‘electronic benefits transfer cards,’’; and

18 (B) by striking ‘‘coupons or authorization

19 cards’’ each place it appears and inserting the

20 following: ‘‘coupons, authorization cards, or

21 electronic benefits transfer cards’’; and

22 (3) in the first sentence of subsection (g), by in23 serting after ‘‘coupons, authorization cards,’’ the fol24 lowing: ‘‘electronic benefits transfer cards,’’.
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1 (l) Section 17 of such Act (7 U.S.C. 2026) is amend2 ed—

3 (1) in the last sentence of subsection (a)(2), by

4 striking ‘‘coupon’’ and inserting ‘‘benefit’’;

5 (2) in subsection (d)(1)(B), by striking ‘‘cou6 pons’’ each place it appears and inserting ‘‘benefits’’;

7 (3) by striking subsection (f); and

8 (4) by redesignating subsections (g) through (k)

9 as subsections (f) through (j), respectively.

10 (m) Section 21 of such Act (7 U.S.C. 2030) is

11 amended—

12 (1) by striking ‘‘coupons’’ each place it appears

13 (other than in subsections (b)(2)(A)(ii) and (d)) and

14 inserting ‘‘benefits’’;

15 (2) in subsection (b)(2)(A)(ii), by striking ‘‘cou16 pons’’ and inserting ‘‘electronic benefits transfer

17 cards or coupons’’; and

18 (3) in subsection (d)—

19 (A) in paragraph (2), by striking ‘‘Cou20 pons’’ and inserting ‘‘Benefits’’; and

21 (B) in paragraph (3), by striking ‘‘in food

22 coupons’’.

23 (n) Section 22 of such Act (7 U.S.C. 2031) is amend24 ed—

25 (1) in subsection (b)—
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1 (A) in paragraph (3)(D)—

2 (i) in clause (ii), by striking ‘‘cou3 pons’’ and inserting ‘‘benefits’’; and

4 (ii) in clause (iii), by striking ‘‘cou5 pons’’ and inserting ‘‘electronic benefits

6 transfer benefits’’;

7 (B) in paragraph (9), by striking ‘‘cou8 pons’’ and inserting ‘‘benefits’’;

9 (C) in paragraph (10)(B)—

10 (i) in the second sentence of clause

11 (i), by striking ‘‘Food coupons’’ and insert12 ing ‘‘Program benefits’’; and

13 (ii) in clause (ii)—

14 (I) in the second sentence, by

15 striking ‘‘Food coupons’’ and insert16 ing ‘‘Benefits’’; and

17 (II) in the third sentence, by

18 striking ‘‘food coupons’’ each place it

19 appears and inserting ‘‘benefits’’;

20 (2) in subsection (d), by striking ‘‘coupons’’

21 each place it appears and inserting ‘‘benefits’’;

22 (3) in subsection (g)(1)(A), by striking ‘‘cou23 pon’’; and

24 (4) in subsection (h), by striking ‘‘food cou25 pons’’ and inserting ‘‘benefits’’.
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1 (o) Section 1956(c)(7)(D) of title 18, United States

2 Code, is amended by inserting ‘‘electronic benefits transfer

3 cards or’’ before ‘‘coupons having’’.

4 (p) This section and the amendments made by this

5 section shall become effective on the date that the Sec6 retary of Agriculture implements a nationwide electronic

7 benefits transfer system in accordance with section 7 of

8 the Food Stamp Act of 1977 (7 U.S.C. 2016) (as amended

9 by this Act).

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