29304 Federal Register / Vol. 63, No.102 /Thursday, May 28, 1998 / Proposed Rule

DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 272 and 273

[Amdt. No. 377]

RIN 0584–AB88

Food Stamp Program: Food Stamp

Recipient Claim Establishment and

Collection Standards

AGENCY: Food and Consumer Service,

USDA.

ACTION: Proposed rule.

SUMMARY: The Food and Nutrition

Service (FNS) is proposing to revise

Food Stamp Program (FSP) regulations

that cover the establishment and

collection of food stamp recipient

claims, including collections at the

Federal level. This rule aims to improve

claims management in the FSP while

providing State agencies with increased

flexibility in their efforts to increase

claims collections. The provisions of the

Personal Responsibility and Work

Opportunity Reconciliation Act of 1996

(PRWORA) affecting recipient claims

are incorporated into this rulemaking

and this action is consistent with the

President’s regulatory reform effort. This

proposed rule also strives to achieve a

balance between State agency flexibility

and fiscal accountability.

Food stamp recipient claims are

established against households that

receive more benefits than they are

entitled to receive. The last major

revision to these regulations was in

1983. Recent legislation, technological

advances and changes in Federal debt

management regulations have rendered

many portions of the current regulations

obsolete. In addition, the current

regulations place unnecessary burdens

on State agencies. The proposed

changes are intended to: incorporate

changes mandated by PRWORA;

simplify presentation of policy;

incorporate Federal debt management

regulations and statutory revisions into

food stamp recipient claim

management; and provide State agencies

with additional tools to facilitate the

establishment, collection and

disposition of food stamp recipient

claims.

DATES: Comments on this proposed

rulemaking must be received by August

26, 1998 to be assured of consideration.

ADDRESSES: Comments should be

submitted to James I. Porter, Recipient

Claims Coordinator, Program

Accountability Division, Food Stamp

Program, Food and Nutrition Service,

USDA, 3101 Park Center Drive,

Alexandria, Virginia 22302. Only

written comments will be accepted. All

written comments will be open for

public inspection during regular

business hours (8:30am to 5:00pm,

Monday through Friday) at 3101 Park

Center Drive, Alexandria, Virginia,

Room 905.

FOR FURTHER INFORMATION CONTACT:

Questions regarding this proposed

rulemaking should be directed to Mr.

Porter at the above address or by

telephone at (703) 305–2385.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This proposed rule has been

determined to be significant and was

reviewed by the Office of Management

and Budget under Executive Order

12866.

Executive Order 12372

The FSP is listed in the Catalog of

Federal Domestic Assistance under No.

10.551. For the reasons set forth in the

final rule at 7 CFR Part 3015, Subpart V

and related Notice (48 FR 29115, June

24, 1983), the FSP is excluded from the

scope of Executive Order 12372 which

requires intergovernmental consultation

with State and local officials.

Regulatory Flexibility Act

This rule has been reviewed with

regard to the requirements of the

Regulatory Flexibility Act of 1980 (5

U.S.C. 601–612). Shirley 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 proposed rule has been reviewed

under Executive Order 12988, Civil

Justice Reform. This rule is intended to

have preemptive effect with respect to

any State or local laws, regulations or

policies which conflict with its

provisions or which would otherwise

impede its full implementation. This

rule is not intended to have retroactive

effect unless so specified in the

‘‘Implementation’’ section of this

preamble. Prior to any judicial challenge

to the provisions of this proposed rule

or the application of its provisions, all

applicable administrative procedures

must be exhausted.

Public Law 104–4

This proposed rule contains no

Federal mandates under the regulatory

provisions of title II of the Unfunded

Mandates Reform Act of 1995 (UMRA),

Pub. L. 104–4, for State, local and tribal

governments or the private sector of

$100 million or more in any one year.

Therefore, this rule is not subject to the

requirements of sections 202 and 205 of

the UMRA.

Paperwork Reduction Act: Recipient

Claims and Reporting Format Redesign

The following constitutes a 60 day

notice being issued by FNS, USDA.

In accordance with the Paperwork

Reduction Act of 1995, this notice

invites the general public and other

public agencies to comment on this

proposal to consolidate several existing

collection burdens by requesting a new

burden.

Written comments must be submitted

on or before July 27, 1998.

Send comments and requests for

copies of this information collection to

James I. Porter, Recipient Claims

Coordinator, Program Accountability

Division, Food Stamp Program, Food

and Nutrition Service, USDA, 3101 Park

Center Drive, Alexandria, Virginia

22302 and to Wendy Taylor, FNS Desk

Officer, Office of Information and

Regulatory Affairs, OMB, Room 10235,

New Executive Office Building,

Washington, DC 20503. For further

information regarding this notice, Mr.

Porter may be contacted at (703) 305–

2385.

Comments regarding these burden

estimates are invited on: (a) Whether the

proposed collection of information is

necessary for the proper performance of

the functions of the agency, including

whether the information will have

practical utility; (b) the accuracy of the

agency’s estimate of the burden of the

proposed collection of information

including the validity of the

methodology and assumptions used; (c)

ways to enhance the quality, utility and

clarity of the information to be

collected; and (d) ways to minimize the

burden of the collection of information

on those who are to respond, including

through the use of appropriate

automated, electronic, mechanical, or

other technological collection

techniques or other forms of information

technology.

All responses to this notice will be

summarized and included in the request

for Office of Management and Budget

(OMB) approval. All comments will also

become a matter of public record.

Title: Food Stamp Data Collection.

OMB Number: A new burden number

is being requested This burden will

consolidate burden associated with

0584–0069, 0584–0080, 0584–0009,

0584–0015, 0584–0081 and 0584–0025.

The existing burden under 0584–0064 is

not being changed.

Form Number: New request for FNS–

695 which will consolidate the FNS–
Federal Register / Vol. 63, No.102 /Thursday, May 28, 1998 / Proposed Rule 29305

209, FNS–46, FNS–250, FNS–259, FNS–

388, FNS–388a and FNS–101 reports.

Type of Request: Consolidation of

several collection and record keeping

burdens into one burden.

Abstract: In accordance with the

Paperwork Reduction Act of 1995, the

reporting and recordkeeping burden

associated with the Notice of Adverse

Action, the demand letter for recipient

claims and general case/claim

recordkeeping has been approved by

OMB under OMB number 0584–0064.

The Department recognizes that, under

this proposed rule, State agencies would

be required to track claim referrals. The

Department does not consider this to be

an additional recordkeeping burden

because tracking referrals is part of

efficient and effective general case

recordkeeping and management that has

already been approved under OMB

0584–0064.

The burden associated with the

reporting of claims under OMB number

0584–0069 consists of the submission of

the Status of Claims Against

Households (FNS–209) report. In an

effort to reduce the number of reports

and/or data elements to be reported, the

Department is proposing to request

OMB to combine and consolidate this

reporting function with a number of

other FNS reports with the result being

one electronic reporting format. The

reports with which the FNS–209 would

be consolidated include the Issuance

Reconciliation Report (FNS–46), Food

Stamp Accountability Report (FNS–

250), Food Stamp Mail Issuance Report

(FNS–259), State Issuance and

Participation Estimates (FNS–388),

Project Area Issuance and Participation

Estimates (FNS–388a) and Participation

in Food Programs—by Race (FNS–101)

as it pertains to the FSP. All of these

reports, including the FNS–209,

currently have assigned to them a

unique OMB burden approval number:

0584–0069 for the FNS–209; 0584–0080

for the FNS–46; 0584–0009 for the FNS–

250; 0584–0015 for the FNS–259; 0584–

0081 for the FNS–388 and FNS–388a;

and 0584–0025 for the FNS–101. To

facilitate the report consolidation effort,

the Department is requesting that OMB

cancel all of the above approval

numbers (with the exception of OMB

number 0584–0025) and assign a single

burden approval number for the new

electronic reporting format. Since the

burden associated with OMB number

0584–0025 also pertains to activity in

the Food Distribution Program, the

Department is not requesting that this

number be canceled. However, the

portion of this burden relating to the

FSP would be removed and transferred

to the newly assigned number.

The number of annual data reporting

elements associated with this reporting

burden will change dramatically.

Currently, the forms proposed to be

replaced have a cumulative total of

3,121,124 annual data reporting

elements resulting in a reporting and

recordkeeping burden of 110,122 hours.

The proposed reporting format, on the

other hand, would only have 15,300

annual data reporting elements.

Even though the number of data

elements would be reduced

significantly, the reporting and

recordkeeping burden hours would

increase by an average one hour per

State agency per report submission. This

is because much of the data proposed to

be reported in the new reporting format

is summational. Under the proposed

reporting format, State agencies would

need to retrieve and record the detailed

data, compute the summational

amounts and maintain the records

necessary for audit purposes. Many

States are already performing this

consolidation function as part of their

existing reporting procedures and

therefore would experience no increase

in burden. The one-hour increase in

burden is to accommodate the

remaining states who would need to

perform some consolidation work to

carry out this function.

Affected Public: State and local

governments.

Estimated Number of Respondents:

37,973.

Estimated Time per Response: 2.90

hours.

Estimated Total Annual Burden:

110,758 hours.

Paperwork Reduction Act: Federal

Collection Methods for Food Stamp

Program Recipient Claims

The following constitutes a 60-day

notice being issued by FNS, USDA.

In accordance with the Paperwork

Reduction Act of 1995, this notice

invites the general public and other

public agencies to comment on this

proposal to change an information

collection burden related to Federal

claims collection methods (FCCM’s).

Written comments must be submitted

on or before July 27, 1998.

Send comments and requests for

copies of this information collection to

James I. Porter, Recipient Claims

Coordinator, Program Accountability

Division, Food Stamp Program, Food

and Nutrition Service, USDA, 3101 Park

Center Drive, Alexandria, Virginia

22302 and to Wendy Taylor, FNS Desk

Officer, Office of Information and

Regulatory Affairs, OMB, Room 10235,

New Executive Office Building,

Washington, DC 20503. For further

information regarding this notice, Mr.

Porter may be contacted at (703) 305–

2385.

Comments regarding these burden

estimates are invited on: (a) Whether the

proposed collection of information is

necessary for the proper performance of

the functions of the agency, including

whether the information will have

practical utility; (b) the accuracy of the

agency’s estimate of the burden of the

proposed collection of information

including the validity of the

methodology and assumptions used; (c)

ways to enhance the quality, utility and

clarity of the information to be

collected; and (d) ways to minimize the

burden of the collection of information

on those who are to respond, including

through the use of appropriate

automated, electronic, mechanical, or

other technological collection

techniques or other forms of information

technology.

All responses to this notice will be

summarized and included in the request

for Office of Management and Budget

(OMB) approval. All comments will also

become a matter of public record.

Title: Federal Collection Methods for

Food Stamp Program Recipient Claims.

OMB Number: 5084–0446.

Expiration date: September 30, 1999.

Type of request: Revision to a

currently approved collection.

Abstract: Changes to the collection

burden would result from two changes

proposed in this rule. One proposed

change is the consolidation of the 60-

day notice for Federal Income Tax

Refund Offset Program (FTROP)(See 7

U.S.C. § 2022(b)(1)(C); 7 CFR

273.18(g)(5)) into an all inclusive 60-day

notice for all types of Federal offsets.

The other is the increased number of 60-

day notices due to the proposed

inclusion of agency error (AE) claims as

a type of claim subject to collection

under Federal offset.

Estimate of Burden: The proposed

rule would increase the annual burden

on State agencies from an average of 450

to 500 hours and for debtors would

decrease from an average of 8 to 6

minutes.

Respondents: The collection would

continue to impact two groups, State

agencies that administer the FSP and

certain individuals who are liable for

overissued food stamp benefits.

Estimated Number of Respondents:

The number of State agency respondents

increase from 52 to 53. The number of

debtor respondents would increase from

370,000 to 425,000.

Estimated Number of Responses per

respondent: As under current rules, for

State agencies the number of responses

would vary from once for such activities
29306 Federal Register / Vol. 63, No.102 /Thursday, May 28, 1998 / Proposed Rule

as certifying files to FNS to 380,000 for

mailing out due process notices. For

debtors the number of responses would

continue to vary from once for such

things as due process notices to three or

four in the case of debtors making

informal inquiries and requesting

reviews.

Estimated Total Annual Burden on

Respondents: Under this proposed rule

the annual reporting and recordkeeping

burden would decrease from 72,862 to

71,803 hours (1,059 hours).

Background

The tolerance of abuse, or even the

perception of such, undermines the

fundamental mission of the FSP. The

efficient and effective establishment and

collection of recipient claims is

essential to program integrity. This rule

aims to improve and increase claims

establishment and also to increase the

collection rate of established claims,

while providing State agencies with

increased flexibility in their efforts to

increase claims collections.

The PRWORA (Pub. L. 104–193)

amended the Food Stamp Act of 1977 (7

U.S.C. 2011–2032) (the FSA) in a

number of ways. This rule proposes to

implement the provisions of the

PRWORA relating to recipient claims.

This rule also proposes to incorporate

certain provisions of the Federal Debt

Collection Improvement Act of 1996

(DCIA)(Pub. L. 104–134, Chapter 10,

signed April 26, 1996) as discussed later

in this preamble in connection with

Federal claim collection methods. The

DCIA amended the Debt Collection Act

of 1982 (31 U.S.C. 3701)(DCA).

In addition to the revisions mandated

by the enactment of the PRWORA, the

Department is proposing a number of

significant changes in discretionary FSP

policy regarding recipient claims. This

rule also proposes certain changes in

FTROP and the Federal Salary Offset

Program, 7 U.S.C. 2022(b)(1)(C)(FSOP),

in response to the amended DCA.

Furthermore, this proposed rule would

extensively reorganize the current

regulations at 7 CFR 273.18. To assist in

the regulatory reorganization and in the

development of the discretionary policy

changes being proposed, the

Department, in an effort to maintain

consistency with the treatment of other

Federal debts, utilized the Federal

Claims Collection Standards (FCCS)

issued by the Department of Treasury

(Treasury) (See 4 CFR Parts 101–105).

The Department also drew upon a

number of other sources including the

policies and regulations of other social

programs, private and public sector

accounting standards, technological

advances, recommendations by the

Department’s Office of the Inspector

General (OIG) and Office of General

Counsel, and suggestions from State

agencies.

Responsibility for Recovering

Overpayments

Current regulations at 7 CFR 273.18(a)

discuss the State agency’s responsibility

for establishing claims as well as the

household’s liability for the amount of

the claim. It also defines the three types

of claims. The Department is proposing

to revise the structure of this paragraph.

The first structural revision would

change the title of the paragraph from

Establishing claims against households

to Responsibility for recovering

overpayments. This is being proposed

because the new title more accurately

portrays the purpose of the paragraph.

In addition, the Department feels that

keeping the current title would lead to

confusion because other paragraphs of

the proposed rule discuss ‘‘establishing’’

claims in much greater detail.

The second structural revision would

involve the breakout of the single

introductory paragraph into two

paragraphs. The first paragraph of the

proposed rule, § 273.18(a)(1), would

establish household liability for

overissuances. Section 273.18(a)(2)

would establish State agency

responsibility for establishing and

recovering overissuances.

Even though the responsibility for

establishment and collection of

overpayments has been delegated to

State agencies, food stamp recipient

claims remain debts to the Federal

government. Section 273.18(a)(2) of the

proposed rule would specify this in

detail. This proposal is not intended to

change policy but simply to clarify

existing policy. As Federal debts, unless

superseded by this or other

Departmental regulation, food stamp

recipient claims are subject to the same

debt collection processes and

procedures as are all other Federal

debts.

Claim Types and Definitions

In the current regulations, there are

three claim types: intentional Program

violation (IPV), inadvertent household

error (IHE) and administrative error. The

proposed rule would keep the same

designations for IPV and IHE claims.

Administrative error claims, on the

other hand, would be renamed and

referred to as agency error (AE) claims.

This is being proposed to be consistent

with the term most commonly used for

this type of claim.

Paragraphs 7 CFR 273.18(a)(1), (a)(2)

and (a)(3) of the current regulations

provide the specific definitions for IPV,

IHE and AE claims. As part of the

regulatory reorganization, this rule

proposes to split out these paragraphs

from 7 CFR 273.18(a) into their own

respective paragraphs: § 273.18(b) for

IPV claims; § 273.18(c) for IHE claims;

and § 273.18(d) for AE claims.

IPV Claims

Current regulations at 7 CFR

273.18(a)(3) provide the definition for

an IPV claim. The paragraph contains

specific instructions as to what must

have occurred for an overissuance to be

handled as an IPV claim. Since the basis

for IPV claims is set by statute, this rule

proposes no change in current policy

about the basis for such claims.

However, as part of the regulatory

reorganization, the Department is

proposing to list the criteria for defining

an IPV claim in separate paragraphs,

§ § 273.18(b)(1) through 273.18(b)(4).

The proposed rule contains one

change regarding IPV claims in an area

in which the Department has discretion.

Current regulations at 7 CFR

273.18(a)(3) mandate that prior to the

determination of IPV the claim shall be

handled as an IHE claim. The

Department is proposing to delete this

mandate thereby making this practice a

State agency option on a case-by-case

basis as long as the claim is established

within the required timeframe (See the

Claim Referral and Backlog section of

this preamble for details on timeframe).

IHE Claims

Current regulations at 7 CFR

273.18(a)(1) provide the definition for

an IHE claim. Under these regulations,

an IHE claim generally results from an

overissuance that was caused by a

misunderstanding or unintended error

on the part of the household. As part of

the regulatory reorganization and in an

effort to enhance FSP simplification, the

Department is proposing to eliminate

much of the definitional language in the

current regulations and simply use the

specific language at § 273.18(c) in the

proposed rule.

AE Claims

Current regulations at 7 CFR

273.18(a)(2) define an AE claim. Under

these current regulations, an AE claim

results from an overissuance that was

caused by a State agency action or

failure to take action. As with the

proposal regarding the definition of an

IHE claim, the Department is proposing

to eliminate unnecessary definitional

language in this paragraph and simply

use the specific language at § 273.18(d)

in this proposed rule.

Section 844 of the PRWORA

eliminated all legislative limitations on
Federal Register / Vol. 63, No.102 /Thursday, May 28, 1998 / Proposed Rule 29307

the collection options available for AE

claims. This ends a previous

inconsistency wherein State agencies

were required to collect AE claims but

were precluded from using the most

effective and efficient collection tool,

involuntary allotment reduction.

Some groups maintain that, since the

reason for the overissuance resulting in

the AE claim was an error by the State

agency, the household should not be

responsible for the overissuance under

laws in a number of States under the

legal concept of equitable estoppel. The

Department disagrees with this position.

The FSP is administered under Federal

law and the Department provides 100

percent of the value of the benefits.

Section 13(a)(2) of the FSA (7 U.S.C.

2022(a)(2)), which was unchanged by

the PRWORA, clearly and

unconditionally provides that adult

members of a household that receive

any overissuance shall be jointly and

severally liable for the value of the

overissuance. Thus, Federal law permits

no exception for equitable estoppel in

the case of an overissuance caused by

State agency error.

Claims for Recipient Trafficking

In a significant policy change, the

Department is proposing, in § 273.18(a)

of this rule, to provide for establishing

a claim against a household for the

value of benefits that are trafficked

rather than redeemed for authorized

food purchases.

Trafficking has long been an IPV

subject to disqualification from FSP

participation. However, the advent of

electronic benefits transfer (EBT) has

provided a source of data that makes it

easier to identify both parties to

trafficking transactions. The availability

of EBT data has already increased the

number of disqualifications for

trafficking. In addition to

disqualification penalties, the

Department believes that trafficking can

also be deterred by the development and

use of additional enforcement tools.

Assessing a claim for the amount of

trafficked benefits offers such a tool.

The authority for this determination is

found in section 13(a)(1) of the FSA (7

U.S.C. 2022(a)(1)) which states that the

Department ‘‘* * * shall have the

power to determine the amount of and

settle and adjust any claim * * *

arising under the provisions of this Act

or the regulations issued pursuant to

this Act, including, but not limited to,

claims arising from fraudulent and

nonfraudulent overissuances to

recipients * * * (emphasis added)’’

Generally, a recipient claim is

established when a household receives

more coupons than the household is

entitled to receive. However, as

indicated above, section 13 of the FSA

(7 U.S.C. 2022) does not limit the

Department to establishing claims

against individuals solely because of

overissuances. Clearly, recipient misuse,

such as trafficking, falls within the

definition of an IPV as specified in 7

CFR 273.16(c)(2). The Department is

thus proposing in this rule that claims

would be established for all IPV’s,

including those caused by trafficking

offenses.

The Department would like to clarify

that this change in policy would have

no effect on the current policy regarding

the establishment and collection of fines

and penalties from authorized retailers

and unauthorized third parties who are

found to have illegally obtained

coupons via trafficking. (See 7 CFR

278.6). Retailer fines and claims act as

a deterrent and punish retailers and

unauthorized third parties for engaging

in prohibited activity. The current

regulations on retailer fines and claims

at 7 CFR 278.6 provide for monetary

penalties significantly larger than the

amount trafficked. The proposed policy

change providing for recipient

trafficking claims, on the other hand,

would directly correlate with the benefit

amount that was trafficked. The

procedure for calculating a recipient

trafficking claim is discussed elsewhere

in this preamble.

The Department also proposes to

establish a second category of claims for

trafficking that is analogous to the

inadvertent household error claim

established for household-caused

overpayments that do not warrant IPV

determinations. A State agency can

assert an ‘‘inadvertent’’ misuse claim in

situations where the State agency

chooses not to obtain or cannot obtain

a formal designation of trafficking

through an administrative or court

determination but can document the

transaction sufficiently to sustain the

claim. The Department is therefore

proposing that instances of inadvertent

recipient misuse be appropriately

treated as IHE’s as described in 7 CFR

273.18(a)(1)(i) of the current regulations

and § 273.18(c) in the proposed rule.

This rule would provide the authority

for State agencies to specifically include

trafficking and recipient misuse in

benefit transactions as a basis for

establishing a claim against a

household.

Claim Calculation

Current regulations at 7 CFR

273.18(c)(1) and 7 CFR 273.18(c)(2)

discuss the procedures for calculating

the amount of a claim due to an

overissuance. Under the proposed

reorganization of 7 CFR 273.18, the

paragraphs on calculating claims would

be combined under § 273.18(e)(1). In

addition, some policy revisions are

being proposed in this area and are

outlined below. The current paragraph

also does not include a provision for

calculating claims for trafficking. The

proposed rule at § 273.18(e)(2) addresses

this issue.

Calculating Recipient Trafficking

Claims

The Department is proposing, in

§ 273.18(e)(2), to include a procedure for

determining the value of a misused

benefit caused by trafficking. The

amount of the misused benefit would be

the value of the trafficked benefit as

determined by: the individual’s

admission; adjudication; or the

documentation, such as detailed

electronic benefits transfer (EBT)

transaction listings, which forms the

basis for the benefit misuse

determination. Trafficking claims could

be either an IPV or IHE claim depending

on the nature of the procedure under

which trafficking was established.

Calculating Overissuance Claims

For an IPV claim due to an

overissuance, current regulations at 7

CFR 273.18(c)(2) provide the parameters

for claim calculation. Current

regulations at 7 CFR 273.18(c)(1)

establish the procedures for calculating

claims for IHE and AE overissuances. In

an effort to provide a better structure,

the Department is proposing to combine

these paragraphs into a single procedure

in § 273.18(e)(1)(i) through (vi) in this

rule. As part of this reorganization and

general streamlining effort, some

unnecessary prescriptive language

would also be removed. In addition to

these structural and streamlining

revisions, several policy changes are

also being proposed in this rule.

The PRWORA included a change in

the calculation of claims caused by

unreported earned income. Section 809

of the PRWORA amended section 5 of

the FSA (7 U.S.C. 2014) by specifying

that the earned income deduction

‘‘* * * shall not be allowed with

respect to determining an overissuance

due to the failure of a household to

report earned income in a timely

manner.’’ This changed current policy

by removing the stipulation that the

failure to properly report income must

be willful or fraudulent. As a result, the

Department is proposing, in

§ 273.18(e)(1)(iii) of this rule, that, in

calculating an IHE claim, the State

agency would not apply the earned

income deduction to that part of any

earned income that the household failed
29308 Federal Register / Vol. 63, No.102 /Thursday, May 28, 1998 / Proposed Rule

to report in a timely manner. This

would be the same policy that the

Department currently has for calculating

IPV claims with unreported earned

income.

In addition to the earned income

revision necessitated by the PRWORA,

the Department is proposing two

additional policy changes related to

claim calculation: (1) Under the

proposed rule, a State agency would be

able to waive up to 20 percent of any

claim if the household cooperates with

the establishment of the claim; and (2)

the amount of the claim would be offset

by the amount of any expunged EBT

benefits. These two policy revisions are

discussed in greater detail in other

sections of this preamble.

Current regulations at 7 CFR

273.18(c)(1)(iii) and (c)(2)(iii) discuss

offsetting the claim amount against any

amount of lost benefits that have not yet

been restored to the household. This

proposed rule does not change this

policy. However, as part of the

regulatory reorganization and since this

area applies more to collecting rather

than calculating claims, the Department

proposes to move this paragraph to the

claims collection section of this rule.

Pre-Establishment Cost Effectiveness

Determination Methodologies

Section 844 of the PRWORA amended

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

by stating that the collection of any

overissuance does not apply ‘‘* * * if

the State agency demonstrates to the

satisfaction of the Secretary * * *’’ that

it is not cost effective to collect that

claim. This establishes that interest in

program integrity must be tempered by

administrative costs considerations.

This provision implies that some test

must be established to assess or

demonstrate the degree of cost

effectiveness for a claim. However, the

Department strongly believes that this

provision (as well as the implementing

language in this rule) by no means

implies that a household has an

automatic ‘‘right’’ to an overpayment

without fear of collection, even if the

overpayment is not cost effective for the

State agency to pursue collection. This

rule addresses standards for

determining which claims must be

pursued. For smaller claims State

agencies should continue to maintain

some probability of collection.

Knowledge that even small

overpayments may be collected

increases payment accuracy by holding

households responsible for accurate

reporting of their circumstances.

The Department believes that a cost

effectiveness test can be applied both

prior to and after establishing a claim.

This section of the preamble discusses

assessing cost effectiveness prior to

establishment and the initiation of

collection action. Assessing cost

effectiveness subsequent to the

initiation of collection action as a means

to determine whether a claim should be

terminated and written off is discussed

elsewhere in this preamble.

In Federal fiscal year 1995 alone, over

775,000 recipient claims were

established nationwide. The Department

recognizes that this sheer volume

negates any notion of a State agency

demonstrating to FNS the degree of cost

effectiveness for claims on an individual

basis. Therefore, the Department is

proposing in this rule that, in lieu of

demonstrating cost-effectiveness to FNS

on an individual claim basis, State

agencies would use standards approved

by FNS to assess the cost effectiveness

of collecting claims.

In determining these standards, the

Department is proposing to present

State agencies with a choice. The first

would be for a State agency to design its

own standard (subject to FNS approval).

The second option would be for a State

agency to use an updated version of the

existing FNS recipient claim threshold.

Both options are discussed below.

State Agency-Developed Methodology

for Cost Effectiveness Determination

The Department is proposing, in

§ 273.18(h)(2) of this rule, how a State

agency could adopt its own procedure,

threshold, and/or methodology for use

in determining whether to pursue the

establishment of any claim and

subsequent collection of the

overissuance. A State agency would

need to submit a detailed analysis of

costs over time and obtain prior

approval from FNS for use of this

procedure, threshold and/or

methodology. Cost effectiveness should

reflect total returns to the Federal and

State government and the total cost of

the State claims collection effort.

The concept of having a State agency

develop its own methodology is an

expansion of current policy. The reason

for this policy expansion is twofold.

First, this option would be consistent

with the spirit of section 844 of the

PRWORA which increases State agency

control over its claims. The stipulation

requiring prior FNS approval of the

methodology to be utilized would be

needed because the provision in the

PRWORA requires that cost

effectiveness be demonstrated to the

satisfaction of FNS, thus reinforcing the

Federal government’s interest in State

stewardship of FSP resources.

The second reason for this policy

expansion is that cost effectiveness

varies significantly from one State

agency to another depending on factors

such as the degree of automated

processing, the amount of historical case

record information, the degree of

centralization, features of administrative

structures, salaries, and the number and

size of claims established. This

observation is supported by a contracted

study released by FNS in June 1996

entitled, ‘‘Optimal Thresholds in the

Collection of Food Stamp Program

Claims.’’ While State agencies have a

responsibility to adopt cost-effective

claims management systems, this

proposal would allow a State agency to

establish a cost-effectiveness

methodology (subject to FNS approval)

to reflect the State agency’s own

situation and expenses.

FNS Threshold for Establishing and

Collecting Overissuances

Current regulations at 7 CFR

273.18(d)(1)(i)(A) require that, except

for those IHE and AE claims which (1)

are collected through offset of restored

benefits or (2) are less than $35 and

cannot be collected through allotment

reduction, State agencies shall initiate

collection action on all IHE and AE

claims. This $35 exception represents

the current FNS threshold for recipient

claim collection.

Since 1982, 12 State agencies

participating in the FSP have received

waivers increasing the $35 FNS

threshold. State agencies have

maintained that the current threshold is

too low because the cost of establishing

and collecting claims exceeded the

thresholds.

Administrative costs relating to

claims actions are the cost of

establishing a claim; calculating the

claim; posting the claim into the State

agency accounting and reporting

system; initiating the various demand

letters and notices; and managing

collections. Economic factors, such as

inflation, in addition to fluctuations in

salary and staffing levels and

automation start-up and maintenance

costs cause changes (usually increases)

in the amount of administrative funding

expended for food stamp claim activity

within each respective State agency over

a given time period. In addition, the

aforementioned contractor study on

recipient claim collection thresholds

found that the optimal thresholds in the

State agencies surveyed were higher

than the current collection threshold.

The study also found that it was more

appropriate to apply the threshold to the

costs of the combined process of

establishing and collecting claims.

Including only the cost of collection led
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to setting too low a threshold from an

economic perspective.

As a result, the Department is

proposing to increase the FNS threshold

for collecting food stamp recipient IHE

and AE claims. In addition, the

Department is proposing to extend this

threshold to IPV claims. The

Department is also proposing utilizing

the same threshold for both establishing

and collecting claims. Current

regulatory language refers only to the

collection of claims and implies there is

no threshold below which claims need

not be established.

In its reorganization of 7 CFR 273.18,

the Department is proposing to break

out and expand the paragraph in the

current regulations dealing with the

threshold, 7 CFR 273.18(d)(1)(i)(A), into

§ 273.18(g)(2)(ii) of the proposed rule. In

§ 273.18(g)(2)(ii), the threshold would

be defined as the maximum dollar

amount of a claim or a claim referral

that a State agency may decide not to

pursue establishment and/or collection

solely based on the amount of the

referral. The purpose of the threshold is

to maximize cost effectiveness in the

establishment, pursuit and recovery of

overissuances in the FSP. The

Department originally considered

proposing to raise this threshold from

$35 to $100. Then the Department

considered establishing a threshold that

would change periodically depending

on the rate of inflation or some similar

economic factor. The Department

decided to strike a balance between

increased State costs and the

uncertainty of a fluctuating threshold by

proposing a fixed threshold of $125.

This proposed threshold is reflected in

§ 273.18(g)(2)(ii) of this rule.

In addition, as noted earlier and

reflected in § 273.18(g)(2)(ii) of the

proposed rule, this threshold would also

apply to IPV claims. The authority to

include IPV’s under the threshold is

found in section 13(a)(1) of the FSA (7

U.S.C. 2022(a)(1)) which provides the

Department with the authority to

delegate to State agencies the power to

‘‘* * * settle and adjust any [recipient]

claim * * * if the [Department]

determines that to do so would serve the

purposes of this Act.’’ The proposed

inclusion of IPV claims under the

threshold would increase the waiver

authority delegated to State agencies.

Currently, procedures for establishing

and pursuing IPV claims vary

significantly from jurisdiction to

jurisdiction. By including IPV claims

under the threshold, the Department

would like to reduce this degree of

variability. However, the Department

would like to emphasize that no

jurisdiction would be prevented from

establishing and/or pursuing the

collection of any claim that falls under

this threshold. State agencies are

encouraged to pursue claims on selected

bases which would act as a deterrent or

be in the best interest of the FSP or

agency to establish or collect.

Finally, the current regulations at 7

CFR 273.18(d)(1)(i)(A) do not allow the

FNS threshold to be applied to claims

that can be recovered by reducing the

household’s allotment. Since the

utilization of this claim collection

method incurs relatively little postestablishment costs, the Department is

not proposing any changes to this

policy.

The Department is interested in

receiving comments on these proposals

concerning the determination of cost

effectiveness for the establishment and

collection of recipient claims. In

addition, the Department is particularly

interested is receiving actual cost data

from State agencies.

Claim Establishment

Claim Referral and Backlog

Under current regulations, no time

frame exists for State agencies to follow

for initiating collection action by

establishing claims. This has resulted in

a number of State agencies either not

establishing or not enforcing internal

time frames for addressing potential

claims, thereby causing a backlog of

claim referrals. These claim referral

backlogs have been cited as deficiencies

and problem areas in Federal and Statelevel management evaluations and

audits conducted by the Department’s

OIG. Potential debts that are not timely

developed into claims become less

collectible the longer they remain

undeveloped.

In an effort to reduce the number of

claims which are not established in a

timely manner, the Department believes

that it is necessary to develop a

minimum timeliness standard for

establishing claims which incorporates

a standardized methodology for

measuring the length of time it takes to

establish a claim after the potential

overissuance is discovered. To

accomplish this, the Department must

initially set the parameters by defining

the starting and ending points of the

process.

The Department is proposing that the

starting point for calculating the length

of time that it takes to establish a claim

would be the date the potential claim is

initially detected. This would be known

as the date of discovery and is being

defined as such in § 273.18(f) of this

proposed rule.

The Department considered and

rejected one other alternative in its

determination of the appropriate

starting point. This alternative was to

use the date of occurrence of the change

that caused the overissuance. For

example, if a household was overissued

benefits because of a decrease in

household size, the starting point would

be the date that the individual(s) left the

household. The Department decided not

to propose this alternative because the

State agency may not become aware of

the change that caused the overissuance

for some time.

In addition to proposing a starting

point to gauge the length of time it takes

to establish a claim after the potential

overissuance is discovered, the

Department is also proposing to define

an ending point for tracking and

reporting purposes. This would be the

date of establishment. The Department

is proposing, in § 273.18(f)(3) of this

rule, to have the date of establishment

be the date that the initial written claim

notification or demand letter is issued to

the household. This is being proposed

because the Department feels that this is

the final step in establishing a claim.

The Department considered one other

alternative as the ending point. This

alternative would define the date of

establishment as the date that the claim

is posted as a receivable in the State

agency’s claim collection and tracking

system. However, while it is integral to

the establishment of a receivable, this is

not being proposed because the

Department believes that a claim is not

truly established until the demand letter

is sent to the household.

The Department is proposing that the

length of time it takes to establish the

claim would simply be the number of

days between the date of discovery

(starting point) and the date of

establishment (ending point).

Now that the mechanism for

measuring the length of time it takes to

establish a claim has been proposed, the

Department is proposing a standard for

the timely establishment of claims.

Originally, the Department considered

a 90-day standard for establishing

claims with an allowance for up to 180

days if the State agency needs to secure

additional documentation from

uncooperative sources. However, this

was not considered feasible because it

would be difficult to track and gauge its

effectiveness given the additional time

allowance that would be allotted for

certain claim referrals. Instead, the

Department is proposing in § 273.18(f)

of this rule to conform with time frames

used in other assistance programs. The

proposed rule would have the same

standard as one that was in place for
29310 Federal Register / Vol. 63, No.102 /Thursday, May 28, 1998 / Proposed Rule

initiating collection action in the Aid to

Families with Dependent Children

(AFDC) Program in July of 1996.

Specifically, claims would need to be

established before the end of the quarter

following the quarter of the discovery of

the claim. As an example, if the date of

discovery is in October, November or

December, the last day for sending the

demand letter in a timely manner would

be March 31.

The Department is aware that a

number of State agencies are either not

establishing or not consistently

enforcing internal time frames for

addressing potential claims. This has

resulted in what many State and

Departmental officials perceive as a

‘‘backlog’’ of claim referrals. However,

the measure of what actually constitutes

a claim referral backlog has never been

defined by the Department and State

agencies have no clear regulatory

guidance on this issue. With its

proposed time frame for establishing

claims, the Department feels that it now

has the mechanism to propose clear

guidance as to what would constitute a

claim backlog.

The Department is proposing in

§ 273.18(f) of this rule to define a claim

backlog as existing when more than 10

percent of the claim referrals are not

established in a timely manner. The

Department chose 10 percent because it

feels that an absolute zero tolerance in

this area would not account for the

claims which would not be able to be

timely established based on

circumstances (such as uncooperative

employers, etc.) which would be out of

the State agency’s control. The

Department did not choose a percentage

greater than 10 percent because it felt it

would be too tolerant and condone

inefficient and ineffective claim

management.

The Department would like to

emphasize that the purpose of

establishing a standard for what is

considered an acceptable as opposed to

an excessive backlog is not to penalize

a State agency with an excessive backlog

but to provide a management tool for

gauging the State agency’s claim

establishment efforts.

The Department is proposing in

§ 273.18(f) that State agencies, in order

to assess the age of referrals, be required

to record the date of discovery and the

establishment date in the claim case file

and/or referral tracking system. The

Department feels that this is not placing

an additional or unnecessary burden on

a State agency as prudent claim

management would dictate that the

State agency would have a system to

internally track referrals already in

place.

Even though the Department is

proposing a new standard for

determining the existence of a claim

backlog, the Department would not

require State agencies to report this

information to FNS. Monitoring would

be achieved in the same manner that

other areas of the FSP are reviewed and

evaluated. The Department feels that the

most effective way for State agencies to

address a deficiency in this area would

be to initially concentrate on preventing

future backlogs by adhering to the

standards proposed in this rule. Once

this is accomplished, corrective action

for the elimination of existing backlogs

could be addressed.

The Department is interested in

receiving comments on the proposed

standard for establishing claims and

measuring a claims backlog.

Initiating Collection Action When the

Household Cannot Initially Be Located

The current regulations at 7 CFR

273.18(d)(1) contain the criteria for

initiating collection action on IHE and

AE claims. This criteria includes

applying the dollar threshold for

collecting claims, not taking action on

households that cannot be located and

postponing collection action on

suspected IPV’s. Proposed changes to

the dollar threshold and the treatment of

suspected IPV’s are discussed in detail

elsewhere in this preamble. In addition

to these changes, the Department is also

proposing a change in policy on

initiating collection action if the

household cannot be located.

The current regulations at 7 CFR

273.18(d)(1)(i)(B) provide that the State

agency shall initiate collection action

for IHE and AE claims unless the

household cannot be located. The

Department is proposing to delete this

paragraph and have the State agency

initiate collection action on these

claims. The reason for this is that, with

the advent of innovative collection

methods such as Federal and State tax

refund offset, it is much easier for State

agencies to eventually locate the

household and collect the claim. In

addition, the household would be

subject to allotment reduction if it

returns to the FSP prior to the claim

being terminated and written off.

Terminating and writing off claims is

discussed elsewhere in this preamble.

The current regulations at 7 CFR

273.18(d)(2) discuss the criteria for

initiating collection action on IPV

claims. This criteria includes making

personal contact with the household.

The Department is proposing to delete

this clause. This is being proposed to

increase the flexibility afforded State

agencies in their collection efforts.

As with IHE and AE claims, the

Department is also proposing to delete

the clause in 7 CFR 273.18(d)(2) that

allows State agencies not to pursue

collection action against IPV claims if

the household cannot be located. The

reason for this being proposed is the

same as with IHE and AE claims: the

increased possibility of collection via

Federal and State tax refund offset and

the possibility of allotment reduction if

the household returns to the FSP before

the claim is terminated.

Household Notification

Requirements at Certification

In the Department’s efforts to afford

State agencies maximum flexibility, the

Department is taking steps to ensure

that household notification

requirements (as required by the Privacy

Act of 1964 at 5 U.S.C. 552a and the

Debt Collection Act of 1982 (DCA), as

amended by the DCIA at 31 U.S.C.

3716(a)) are not compromised. Proper

notification involves informing the

household of its rights regarding the

claim and informing the household at

the time of FSP application of the

potential uses of information provided

by the household to collect the claim.

Households initially provide

identifying information (such as names,

addresses and social security numbers)

as well as other information regarding

household circumstances at the time of

application. This information is used by

State agencies for program purposes

including verification and eligibility

and to refer delinquent claims to other

agencies for various collection tools and

methodologies such as tax refund, salary

and administrative offset. The

Department is proposing in this rule to

require that State agencies inform

households of this potential use of

provided information at the time of

application in a new paragraph,

§ 273.2(b)(4).

Demand Letter Requirements

Under the proposed rule at

§ 273.18(g)(3), a State agency would

simply develop and use its own demand

letter for claim notification and

repayment solicitation. The Department

is proposing several requirements to

ensure that proper notification and due

process conditions are met when the

household is informed of the existence

of the claim via the demand letter.

The first requirement being proposed

by the Department in this rule is that the

claim notification or initial demand

letter would continue to contain a

notice of adverse action (see

§ 273.18(g)(3)(v)). This notice of adverse

action can either be an attachment or
Federal Register / Vol. 63, No.102 /Thursday, May 28, 1998 / Proposed Rule 29311

contained in the body of the initial

demand letter itself. This notice would

also provide the household with the

opportunity for a fair hearing on the

validity and amount of the claim. At a

fair hearing (or at an administrative

disqualification hearing for some IPVs),

the household currently is provided the

opportunity to inspect and copy agency

records and review with the agency the

circumstances relating to the claim. This

conforms with the information

availability requirements in the DCA at

31 U.S.C. 3716(a)(2) and (a)(3). The

current regulations regarding fair

hearings (7 CFR 273.15) and

administrative disqualification hearings

(7 CFR 273.16) are not affected by this

proposed rule.

In addition, to ensure proper

notification per 31 U.S.C. 3716(a)(1) and

(a)(4), the demand letter or

accompanying notice of adverse action

would contain information to provide

the household with written notice of: (1)

The type and amount of the claim, the

intent to collect the claim, if not paid,

by referral to other agencies, including

private collection agencies, for various

claims collection actions including, but

not limited to, administrative offset, tax

refund offset and salary offset; (2) the

opportunity to inspect and copy the

records related to the claim; (3) the

opportunity for an administrative

review (fair hearing) of the decision

related to the claim; and (4) the

opportunity to make a written

agreement to repay the amount of the

claim prior to the claim being referred

for Federal collection methods. The

Department is also proposing that the

demand letter contain language

specifying that, if the claim becomes

delinquent, the household may be

subject to additional delinquent and/or

processing charges. Finally, the

Department is proposing that the

demand letter provide notification that

all adult household members are

equally liable for the claim and that the

claim, if not otherwise collected, may be

referred to the Department of Justice for

litigation. These proposals are reflected

in § 273.18(g)(3)(iii) and (g)(3)(iv) of this

rule.

Elimination of Repayment Option

Choice in the Demand Letter

Prior to the enactment of the

PRWORA, section 13(b) of the FSA (7

U.S.C. 2022(a)(1)) contained the

stipulation that the household had the

option of selecting the method of

payment. This resulted in the

formulation of detailed regulations at 7

CFR 273.18(d)(3) implementing this

legislative requirement. In section 844

of the PRWORA, Congress removed all

references in section 13 of the FSA (7

U.S.C. 2022) which pertained to

allowing the household to select the

method of payment. In their place,

Congress provided the State agency (and

not the household) with the prerogative

to select the appropriate payment

method. In addition, section 844 of the

PRWORA gave the State agency the

authority to establish its own

requirements for providing notice to a

household with an overissuance.

Although State agencies will have

greater flexibility in providing notice,

the Department is proposing the

minimum due process notice

requirements specified in the DCA, as

discussed above, in order to assure that

collection through Federal

administrative offset and other methods

are available to State agencies. These

changes are reflected in § 273.18(g)(3) of

this proposed rule.

In addition, other prescriptive

language in 7 CFR 273.18(d)(3)

regarding demand letter content

unrelated to household notification

rights discussed above would also be

removed to conform to allow for greater

State agency flexibility in this area.

Claim Management

Delinquency and Due Date

In most accounts receivable systems,

certain actions beyond the original

demand letter or claim notification

generally occur when a receivable is not

paid timely and becomes delinquent.

These actions usually facilitate further

collection action and/or disposition of

the receivable. The Department believes

that the processing of food stamp

recipient claims should be no different

from other receivables in this regard.

The Department is proposing in this

rule to clearly define what constitutes

delinquency in food stamp recipient

claims. This is being proposed in an

effort to increase consistency among

State agencies in the treatment of food

stamp claims with outstanding balances.

This lack of consistency undermines the

integrity of the aggregate receivable data

compiled by the Department as part of

its financial statement. The Department

also feels that standardization is

necessary in this instance because

recipient claims are ultimately Federal

debts and the individualized approach

by State agencies results in inconsistent

treatment. In addition, the proper aging

of claims (which is a Treasury

requirement for all Federal debts)

facilitates optimal claim management

from establishment through collection

and final disposition. Therefore, the first

step in effective and consistent postestablishment claims management

requires a definition of delinquency that

then triggers subsequent steps in the

claims collection process.

The current regulations governing

food stamp recipient claims at 7 CFR

273.18 do not define or even utilize the

terms delinquent or delinquency.

Delinquency, however, is defined at 4

CFR 101.2(b) in Treasury’s FCCS as

occurring when a claim ‘‘* * * has not

been paid by the date specified in the

agency’s initial written

notification* * * unless other

satisfactory payment arrangements have

been made by that date, or if, at any

time thereafter, the debtor fails to satisfy

obligations under a payment agreement

with the creditor agency.’’ The

Department is planning to use this

definition as a basis for defining

delinquency for food stamp recipient

claims.

Delinquency, in the FCCS’s

definition, is determined contingent

upon the non-receipt of payment by the

‘‘date specified’’ in the notification

unless other arrangements have been

made. The ‘‘date specified’’ is

commonly known as the due date. To

have a delinquent claim based on the

initial demand letter, according to the

FCCS, the agency should have a due

date specified in its initial demand

letter. Therefore, in an effort to establish

delinquency in conformance with the

FCCS on this issue, the Department is

proposing in § 273.18(g)(3)(v) to require

that all initial demand letters contain a

due date in their text. The due date

would be up to 30 days after the date

of the initial demand letter. This

conforms with the response time frame

established by the FCCS at 4 CFR

102.2(b).

The paragraph at 7 CFR 273.18(g)(2)

in the current regulations governing

recipient claims discusses the

procedures when a household fails to

make an installment payment in

accordance with the established

repayment schedule. This is the same

situation as specified in the second part

of the FCCS’s definition of delinquency

which states that a claim is considered

delinquent when ‘‘* * * the debtor

fails to satisfy obligations under a

payment agreement* * * ’’ In this

instance, the due date would be the date

that payment was to have been received

in accordance with the installment

agreement. The Department is therefore

proposing, in § 273.18(g)(4) of this rule,

that all repayment agreements specify

when payments are to be due and that

the claim will be considered delinquent

and may be subject to involuntary

collection actions if payment is not

received by the due date.
29312 Federal Register / Vol. 63, No.102 /Thursday, May 28, 1998 / Proposed Rule

The proposals in this rule to require

a due date in both initial demand letters

and installment agreements would give

the Department the ability to define

delinquency in a manner that is

consistent with the FCCS’s definition.

While the Department recognizes that it

has the authority to define terms and

establish policy that differ from the

FCCS, it feels that it would be in the

best interest of the FSP to be consistent

with the FCCS on this issue. Therefore,

the Department, in § 273.18(g)(5) of this

rule, is proposing to define a delinquent

food stamp recipient claim as a claim:

(1) Which has not been paid by the due

date specified in the State agency’s

initial written demand letter and a

satisfactory payment arrangement has

not been made; or (2) if a satisfactory

payment arrangement has been made, a

claim for which a payment has not been

paid by a date required payment in

accordance with an established

repayment schedule. A claim would

remain delinquent under either of these

criteria until payment is received in full,

a satisfactory payment agreement is

negotiated (or renegotiated), or

allotment reduction is invoked.

The Department is proposing to have

two exceptions to its definition of

delinquency. The first exception

involves multiple claims. The

Department is proposing in

§ 273.18(g)(5)(iv) that a claim would not

be considered delinquent if another

claim or claims for the same household

exists and the other claim(s) is currently

being paid either through an installment

agreement or allotment reduction. In

addition, the State agency would have

to expect to begin collection on the

claim once the other claim(s) is settled.

This is being proposed to ensure that

claims that are collectible and simply

‘‘waiting their turn’’ would not be

subjected to activities such as

involuntary collection actions and

termination.

The second exception to the

definition of delinquency involves IPV

claims where the collection is

coordinated through the court system.

The Department is proposing this

exception in § 273.18(g)(5)(iv) because it

recognizes that the State agency which

is responsible for overall food stamp

recipient claim collecting and reporting

may be limited in its control over this

type of claim. This exception to the

definition would be optional depending

upon the collection system and

coordination between the court and

State agency.

The Department is interested in

receiving comments on this proposal to

define delinquency.

Delinquency and Fair Hearing Requests

Current regulations governing fair

hearing requests at 7 CFR 273.15(g) state

that the ‘‘* * * household shall be

allowed to request a (fair) hearing on

any action * * * which occurred in the

prior 90 days.’’ For food stamp recipient

claims, the 90-day fair hearing standard

is applicable to the initial demand

letter. Therefore, the Department is

proposing in § 273.18(g)(6) of this rule

to specify that, once a household timely

requests a fair hearing, all attempts to

collect the claim would cease. This

would be done to protect the rights of

the household. If, when the hearing

decision is rendered, it is determined

that a claim does, in fact, exist against

the household, the household would be

sent another demand letter. This

demand letter may be combined with

the notice of the hearing decision. The

determination of delinquency would

then be based on whether payment is

received or an agreement to pay is

reached by the due date on this

subsequent demand letter.

If, when the hearing decision is

rendered, it is determined that a claim

does not exist, the Department is

proposing in § 273.18(g)(8) that the

claim be terminated and written-off.

This is discussed in greater detail in

another section of this preamble.

Claim Termination and Write-off

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

2022(a)(1)) authorizes the Department to

settle and adjust all or part of any food

stamp recipient claim if it serves the

purposes of the FSP. Current regulations

at 7 CFR 273.18(e) specify the

conditions by which collection action

on claims may be suspended and

terminated. Suspended claims are

claims in which no more collection

action will be actively taken. A

suspended claim may be terminated

after it has been held in suspense for

three years.

In many State agencies, claims that

are currently under ‘‘suspension’’ are

being or soon will be subjected to a

variety of collection methods. These

methods include such collection

alternatives as salary offset and State

and Federal tax refund offset. The

Department feels that, with the

introduction of these innovative

collection methods, it would be unlikely

in an effective claims collection

environment for a claim to fall under

the definition of a suspended claim as

per 7 CFR 273.18(e) in the current

regulations. Therefore, the Department

is proposing in this rule to eliminate all

references to the concept of suspending

food stamp recipient claims. Having a

designation for claims that will be

inactive for three years without any

subsequent collection action being

planned serves no purpose, especially

with the advent of the additional

collection methods.

In the current regulations, there is no

requirement to terminate claims and

there is no clear definition of this term.

The regulations at 7 CFR 273.18(e)(ii)(3)

simply state that a ‘‘* * * claim may be

determined uncollectible after it is held

in suspense for 3 years (emphasis

added).’’ The lack of a requirement or

clear definition has resulted in a large

number of uncollectible claims being

included in reports submitted to FNS

and sizable account receivables being

unnecessarily maintained in State

agencies’ ledgers. In addition, efficient

and effective claims management

advocates timely and aggressive action

on a debt but with a quick disposition

through termination when the

probability of collection proves low.

A study released by a Departmental

contractor in August 1994 entitled,

‘‘Standard Operating Principles and

Detailed Standard Operating Procedures

for Food Stamp Recipient Claims,’’

recommended that terminating and

writing-off claims be made a

requirement if the claims meet certain

criteria. The study compared the current

approach to food stamp recipient claim

accounting with generally accepted

accounting principles. These generally

accepted accounting principles

included statements from the Federal

Accounting Standards Advisory Board,

Acts of Congress, Treasury regulations

(including the FCCS), and other

authoritative documents. Page 15 of the

Departmental contractor study specified

that an organization’s termination and

write-off policy should ‘‘* * * include

the collection agent’s definition of an

uncollectible claim specifying which

circumstances require a claim to be

written-off and under which

circumstances a claim may be deemed

uncollectible by the decision of

management. The write-off policy * * *

should be strictly applied.’’

The Department, in § 273.18(g)(9) of

this rule, is therefore proposing to

define a terminated claim as one in

which all collection action has ceased.

Under the proposed rule, a terminated

claim would be immediately written-off,

that is, it would be no longer considered

a receivable subject to continued

Federal and State agency collection and

reporting requirements. A claim would

have to fit one of the five criteria listed

below to be terminated and written-off.

In determining which criteria should

be used to terminate a claim, the

Department considered the
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requirements found in 4 CFR 104.3 in

the current FCCS published by

Treasury. This paragraph of the FCCS

contains five specific standards for

terminating and writing-off claims: (a)

The inability to collect any substantial

amount; (b) the inability to locate the

debtor; (c) the cost will exceed recovery;

(d) the claim is legally without merit; or

(e) the claim cannot be substantiated by

evidence.

In determining the Department’s

termination and write-off policy, FCCS

standard (a), the inability to collect any

substantial amount, was considered as

it is of fundamental concern when the

debtors primarily consist of households

which are currently participating or

were recently eligible to participate in a

means tested program such as the FSP.

FCCS standard (b), the inability to

locate the debtor, was also considered in

the development of the Department’s

proposed termination and write-off

policy. The Department’s termination

and write-off policy being proposed in

this rule takes into account the

capabilities of the tax refund and other

automated offset programs that are very

effective in collecting from difficult-tolocate household members.

FCCS standard (c), cost will exceed

recovery, is certainly a factor in the

Department’s proposal. Food stamp

claims, by nature, are usually relatively

small with the average claim established

in Federal fiscal year 1995 being $464.

This is also a predominant factor in a

proposal discussed in another section of

this preamble regarding cost

effectiveness determination prior to

claim establishment.

Food stamp recipient claim

terminations and write-offs that may be

applicable under FCCS standards (d),

claim legally without merit, and (e),

claim cannot be substantiated by

evidence, are usually handled under the

fair hearing process in the FSP.

Administrative disqualification hearing

and court determinations that

specifically find that no overissuance

occurred are also pertinent to these

standards.

Taking into account FCCS standards

(a) through (e), the Department is

proposing in § 273.18(g)(9) to require

State agencies to terminate and write-off

a food stamp recipient claim if it meets

any one of the following five criteria: (1)

Any claim which is found to be invalid

in a fair hearing, administrative

disqualification hearing or court

determination; (2) Any claim in which

all adult household members are

deceased and the State agency is not

planning to pursue collection from the

estate; (3) Any claim which has an

outstanding balance of $25 or less and

has been delinquent for 90 days or

more; (4) Any claim that the State

agency has determined is not cost

effective to collect; or (5) Any claim that

has been delinquent for three years.

The fourth Departmental criterion

states that any claim that the State

agency has determined not to be cost

effective to collect shall be terminated

and written off. To determine cost

effectiveness, the Department believes

that a State agency should use the

standards already in use for food stamp

recipient claims. If no standards

currently exist, the State agency shall

develop standards subject to FNS

approval.

In the fifth Departmental criterion, a

State agency would be required to

terminate and write-off any claim that

has been delinquent for three years. The

decision to require termination and

write-off after three years of

delinquency is based on a

recommendation in the aforementioned

contractor study (August 1994). Page 16

of the study specifies that ‘‘* * * three

years of delinquency is a reasonable

amount of time to collect on outstanding

debts, and that debts exceeding this

time limit will likely not be collected

with additional effort or time and

should be written-off.’’

In addition, for the fifth criterion, the

Department is proposing to add a

qualifier that the State agency may opt

not to terminate a claim which has been

delinquent for three years or more if

prior collections have been realized

through Federal or state tax refund

offset, salary offset or any other similar

collection mechanism. This proposed

qualifier was added because, even

though these claims technically remain

delinquent, the probability of collection

via offset in the future may be relatively

high because a portion of the claim has

already been collected via this

collection method.

An issue has been raised concerning

the possible reinstatement of terminated

claims if an additional collection

methodology is introduced or an event

(such as lottery winnings) occurs to

substantially increase the likelihood of

future collections. In such cases State

agencies may reinstate the claim.

Compromising Claims

The areas in the current regulations at

7 CFR 273.18(g)(2) and (g)(4) concerning

compromising claims would be

consolidated into its own section,

§ 273.18(g)(7) in the proposed rule. The

Department is proposing two revisions

in this area to increase consistency with

the FCCS at 4 CFR Part 103. The first

proposed revision would limit the

authority to compromise to claims

under $20,000. The second proposed

revision would provide that, if a claim

becomes delinquent, any compromised

portion of that claim would be

reinstated to the claim balance.

Acceptable Forms of Payment

Current regulations at 7 CFR 273.18(g)

indicate that payments for claims shall

be accepted in various forms of cash,

food coupons, offsets, intercepts and

reductions to the household’s allotment.

The Department is proposing some

policy clarifications and changes in this

area.

‘‘Cash’’ Payments

The Department would like to clarify

in § 273.18(h)(2)(i) of this rule that

acceptable ‘‘cash’’ payments for food

stamp claims actually take several

forms. In addition to traditional forms of

cash payments such as cash, check or

money order, the Department also

considers payments made via credit

and/or debit cards as acceptable

methods of payment if the State agency

has the capability to accept such

payments. Payment in these and other

generally accepted formats are

acceptable for both lump sum and

installment payments. Offering

alternative forms of payment increases

the possibility of collection and State

agencies are encouraged to explore these

alternative payment methods.

Currently, no policy exists regarding

the issue of crediting cash collections

received as general lump sum or

installment payments for joint food

stamp/other social service program

recipient claims. In an effort to ensure

that each program receives its fair share

in joint collections, the Department is

proposing, in § 273.18(h)(2)(ii) of this

rule, to require that each program

receive its appropriate pro rata share of

any installment collection. For example,

under the proposed rule, if a $700

public assistance and $300 food stamp

claim were combined into a $1,000

claim, 30 percent of an undesignated

payment would be credited to the food

stamp portion of the claim while 70

percent would be credited to the public

assistance portion. This proposal would

not pertain to any designated payment

or agreement that includes the specific

withholding of public assistance or food

stamp benefits to satisfy a claim.

Coupon and EBT Payments

The Department is not proposing any

changes to the current regulations

regarding payments made using paper

food coupons. The Department is also

not proposing any changes regarding the

handling of coupons or coupon books

collected as payments. However, EBT
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benefits are also included under the

definition of coupon in the current

regulations at 7 CFR 271.2. The

Department believes that the distinctive

characteristics of EBT, as opposed to

those of the traditional paper food

coupon system, warrant special

attention in the area of recipient claims

collection.

An active EBT benefit account is one

in which benefits have been accessed

within the last three months. The

Department is proposing, in

§ 273.18(h)(4)(iii) of this rule, to make

the policy concerning active EBT benefit

accounts and claims collection

consistent with the current policy

regarding claim repayment via paper

coupons. This would allow a household

to voluntarily pay all or part of its

outstanding claim with funds taken

from its EBT benefit account. This

would differ from allotment reduction

in that the payment is being made

subsequent to the allotment being

issued and credited to the household’s

EBT benefit account.

The actual methodology and

procedure to enact this transaction

regarding the use of Point-of-Sale

devices, administrative terminals or any

other acceptable method to conduct

these transactions would be determined

by the State agency and included in its

EBT system design.

In addition to the above, the

Department is proposing an additional

requirement to safeguard the rights of

households by ensuring that involuntary

payments would not be made from EBT

benefit accounts. The proposed rule, in

§ 273.18(h)(4)(iii), would require that

the State agency secure and retain a

statement or document signed by a

household member or representative

authorizing the transaction. A signed

document for each transaction would

not be necessary, however, if each

transaction was completed in

accordance with a signed repayment

agreement or similar document. The

signed agreement would serve as

adequate documentation.

The same policy that applies to active

EBT benefit accounts also applies to

inactive or stale EBT benefit accounts.

Inactive or stale EBT benefit accounts

are those accounts that have not been

accessed for three months or longer and

have yet to be expunged. The

Department, in § 273.18(h)(4) of this

rule, is proposing that voluntary

payments from inactive or stale

accounts be accepted once the account

is reactivated at the request of the

household in accordance with 7 CFR

274.12(f)(7).

The Department recognizes that some

State agencies may have difficulty

assimilating this change into already

existing EBT environments. However,

State agencies, by complying with the

current requirements in 7 CFR

274.12(e)(1), should already have a

system in place to administratively

adjust amounts in EBT benefit accounts.

Adapting this system for paying off

claims may not be a major undertaking.

The Department believes that, in

addition to maintaining consistency

with the current policy regarding paper

coupons, cooperating households

should be afforded maximum flexibility

in their efforts to voluntarily repay a

claim.

The Department would also like to

take this opportunity to stress that the

collection of claims using EBT benefits

is considered a non-cash collection and

corresponding funds should not be

drawn from the Federal EBT benefit

account by the State agency when this

type of collection is made.

EBT benefit accounts that have not

been accessed by the household for one

year are expunged and households lose

all entitlement to these benefits. These

benefits are then returned to FNS in

accordance with 7 CFR 274.12(f)(7) of

the current regulations. The Department

considered allowing State agencies to

treat already expunged EBT benefits as

a ‘‘collection’’ and therefore allow State

agencies to retain their appropriate

share of the collection. However, since

the accounts were already expunged

and returned to FNS, a complex system

and reporting mechanism would need to

be designed and implemented to ensure

that these ‘‘collected’’ but expunged

(and therefore essentially nonexistent)

funds are properly accounted for in FNS

and State agency reporting. The

Department feels that this would be

inefficient and not cost effective from

both a Federal and State agency

perspective.

However, the Department does

recognize that these are benefits that the

household never used. This presents the

possibility that a household may have

consciously not used its benefits

because it was aware of the existence of

an overissuance and, essentially placed

these funds ‘‘in escrow’’ to make good

on the error. The Department believes

that including this amount in a claim to

repay the overissuance is inappropriate.

Therefore, the Department is proposing,

in § 273.18(e), to allow a State agency to

subtract the value of expunged EBT

benefits from overissuances prior to the

establishment of the claim. This would

be the final step in the claim calculation

process and would not be considered a

‘‘collection’’ for Federal reporting

purposes. In instances where the claim

is already established and benefits

become expunged, the State would

subtract the amount of the expunged

benefits from the claim balance. This is

reflected in § 273.18(h)(4)(v) of this

proposed rule. Again, this adjustment

would not be considered a ‘‘collection’’

for Federal reporting purposes.

The Department is interested in

receiving comments on the use of funds

from EBT benefit accounts to repay

outstanding recipient claims.

Collection and Payment Methods

Section 844 of the PRWORA made

significant changes to the FSA (7 U.S.C.

2011–2032) in the areas of collections

and payments. One revision to section

13 of the FSA (7 U.S.C. 2022) states that

a State agency shall collect a claim

‘‘* * * in accordance with

requirements established by the State

agency for * * * electing a means of

payment, and establishing a time

schedule for payment.’’ This change is

significant in two areas. First, the State

agency, and not the household, now

determines the appropriate collection

method, including whether to provide

options to the household, when the

claim is initially established. Second,

this revision also provides the State

agency with the ability to involuntarily

subject all claims to all collection

methods—including those such as

allotment reduction for AE claims that,

until the enactment of the PRWORA,

could only be collected on a voluntary

basis. These changes are reflected in

each applicable paragraph in § 273.18(i)

in this proposed rule.

The PRWORA addresses specific

collection methodologies by stating that

a claim shall be collected by ‘‘* * * (A)

reducing the allotment of the

household; (B) withholding amounts

from unemployment compensation

* * *; (C) recovering from Federal pay

or Federal income tax refund * * *; or

(D) any other means.’’ The PRWORA

further states that these methods shall

not be applicable if the State agency can

demonstrate ‘‘* * * that all of the

means are not cost effective.’’ This

proposed rule includes a paragraph in

§ 273.18(i) for each of the collection

methods (allotment reduction,

unemployment compensation, and

Federal salary and Federal income tax

refund offsets) specified in the

PRWORA. Federal salary and Federal

income tax refund offsets are also

discussed in much greater detail

elsewhere in this preamble and in

§ 273.18(p). In addition, other means of

payment, notably lump sum and via

installments, are included in § 273.18(i).

Cost effectiveness is addressed in the

detailed discussion for each payment

method as well as in the discussions in
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this preamble regarding preestablishment cost effectiveness

determination and claim termination

and write-off.

Allotment Reduction

A major change in section 13 of the

FSA (7 U.S.C. 2022) brought about by

section 844 of the PRWORA involves

the use of allotment reduction to collect

claims. Prior to the enactment of the

PRWORA, a participating household

with any type of claim could opt to pay

its claim using a method other than

allotment reduction. In addition, a State

agency was statutorily prohibited from

invoking involuntary allotment

reduction against a household with an

AE claim. Section 844 of the PRWORA

removed the household’s right to choose

the payment option for any type of

claim. As a result, this places allotment

reduction, which is widely recognized

by State and local agencies as the most

cost effective and efficient food stamp

recipient claim collection method, in

the forefront as the primary collection

method.

This is being reflected in this rule.

The Department is proposing, in

§ 273.18(i)(1), to require that a State

agency automatically collect payment

from a participating household for any

established claim, including an AE

claim, through allotment reduction.

There would only be two stipulations to

this proposal. The first would be that

the household would need to be

initially notified of the existence of the

claim. This is discussed in greater detail

elsewhere in this preamble. The second

stipulation would be that a household’s

initial allotment shall not be reduced to

collect the claim. This stipulation is

included because the initial allotment is

usually pro rated and therefore has

already been reduced. This is not a

change from current policy.

Some may argue that it is unfair to a

household to collect an AE claim

through involuntary allotment reduction

since the reason for the overissuance

was not the fault of the household. The

Department believes that, since

Congress specifically removed the

prohibition from the FSA, that it is

clearly the intent of Congress to allow

this type of collection.

In addition to the above, the

Department is proposing to make three

additional policy and several structural

revisions to the paragraph governing

allotment reduction at 7 CFR

273.18(g)(4) in the current regulations.

The structural revisions are being

proposed to avoid repetition by

eliminating much of the language in the

introductory paragraph that may be

found elsewhere in the rule. This

includes the notification procedures and

the acceptance of lump sum payments.

Two of the three additional policy

changes in allotment reduction being

proposed concern the current benefit

reduction procedures and IPV claims.

The current regulations at 7 CFR

273.18(g)(4)(i) provide that benefit

reduction for an IHE claim is to be

computed from the monthly allotment.

The allotment is the benefit level that

the household is scheduled to receive.

Benefit reduction (in current 7 CFR

273.18(g)(4)(iii)) for an IPV claim, on the

other hand, is to be computed from the

monthly entitlement. The entitlement is

the benefit amount that the household

would have received if the household

member was not disqualified for

committing the IPV. Several State

agencies have obtained waivers to use

the allotment rather than the

entitlement as the basis for reducing the

household’s benefits. For the purposes

of administrative efficiency, which was

the basis for the Department approving

the waivers, this rule, in

§ 273.18(i)(1)(ii), would allow all State

agencies to determine the benefit

reduction amount for IPV claims based

on either the allotment or entitlement as

long as all areas within the State

handles the calculation of benefit

reductions in the same manner.

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. In the

second policy change, the Department is

proposing, in § 273.18(i)(1)(ii), to

increase the maximum recoupment

amount for an IPV claim to the greater

of $20 per month or 20 percent of a

household’s monthly entitlement or

allotment. This is being proposed as an

effort to expedite the collection of

claims stemming from intentional

violations. The rule also proposes in

§ 273.18(i)(1)(i) to provide that

individuals in households subject to

allotment reduction are not subject to

involuntary collection by any other

methods.

The final policy change being

proposed in this rule is to specifically

include a paragraph (§ 273.18(i)(1)(v))

which would provide a State agency

with the prerogative to pursue

additional collection methods against

individuals who are past household

members and who are severally

responsible for repayment of this claim.

This is being proposed because of the

dynamic nature of households in regard

to make-up and participation in the

FSP.

Intercept of Unemployment

Compensation Benefits

Current regulations at 7 CFR

273.18(d)(3)(vi) state that a State agency

may implement the intercept of

unemployment compensation benefits

as a voluntary payment option for IPV

claims. In addition, the current

regulations at 7 CFR 272.12 also discuss

collecting claims via this method. In an

effort to streamline this area of the

regulations, the Department is

proposing, in this rule, to remove the

paragraph currently at 7 CFR 272.12.

In addition to the above streamlining

effort, a change in policy, brought about

by section 844 of the PRWORA, is being

proposed regarding collection via an

intercept of unemployment

compensation benefits.

Currently, the intercept of

unemployment benefits is allowed only

for IPV claims. Section 273.18(i)(5) of

the proposed rule would extend this

collection method to any claim. This is

being proposed to conform with the

requirement in section 840 of the

PRWORA that provides for a State

agency to use any collection method to

collect any type of claim.

Currently, unemployment

compensation intercept is optional and

State agencies are not mandated to use

this collection method. The Department

is not proposing to change this policy in

this rule. The reason for the Department

not proposing to mandate this collection

method is that the intercept of

unemployment compensation benefits is

State-specific and therefore it may not

be cost effective to implement in some

State agencies. Even though this would

remain an option under this proposed

rule, the Department strongly urges

State agencies to pursue this avenue of

claims collection.

Coordination with Federal Claim

Collection Methods

Current rules specify requirements for

FTROP and FSOP at 7 CFR 273.18(g)(5)

and (g)(6). This rule would include

proposed requirements for these as well

as other Federal collection programs

such as the Treasury Offset Program

(TOP) at § 273.18(p). To the extent that

it is feasible, the Department wants

State agencies to use these and other

Federal collection methods concurrently

with State agency methods.

Accordingly, this rule proposes at

§ 273.18(i)(7) to authorize such

concurrent collection.

Lump Sum Payments

Current regulations at 7 CFR

273.18(g)(1)(i) through (iii) allow for the

full or partial collection of claims via a
29316 Federal Register / Vol. 63, No.102 /Thursday, May 28, 1998 / Proposed Rule

lump sum cash or coupon payment. As

part of the regulatory reorganization,

these three paragraphs would be

consolidated into one paragraph

(§ 273.18(i)(3)) in the proposed rule. The

proposed rule would also include using

funds in an EBT benefit account as a

lump sum payment. This is discussed in

greater detail elsewhere in this

preamble.

Installment Payments

Current regulations at 7 CFR

273.18(g)(2) provide the procedures for

installment payments. The Department

is not proposing to make any substantial

change to the procedure found in the

first paragraph (7 CFR 273.18(g)(2)(i)) of

this section. Paragraphs (ii) through (iv)

of 7 CFR 273.18(g)(2) in the current

regulations provide detailed procedures

for when the household fails to make a

scheduled payment. These procedures

currently call for providing a household

with another notice and an opportunity

to renegotiate its payment schedule if it

fails to make a payment. The

Department, in an effort to streamline

this area of the regulations, is proposing

to increase State agency flexibility by

eliminating much of the language

contained in these paragraphs.

The Department believes that

installment payments should be made

available but also should be at least as

efficient and effective as allotment

reduction and other collection methods.

Consequently, the proposed rule at

§ 273.18(i) would permit a State agency

to take whatever action it feels is

appropriate if a household fails to make

an installment payment provided the

household was previously notified of a

potential adverse action if payments are

not made in accordance with the terms

of the original repayment agreement.

Additional Collection Actions

The Department is proposing in

§ 273.18(i)(6) to add a paragraph stating

that State agencies may employ any

additional collection methods to collect

claims. These actions would include,

but would not be limited to, referral to

a collection agency, state tax refund and

lottery offsets, wage garnishments,

property liens and small claims court.

This is being proposed to clarify that

State agencies are able to employ any

other means of collection for all types of

claims.

Retention Rates

The applicable retention rates in the

current regulations at 7 CFR 273.18(h)

for collections by a State agency are 50

percent for IPV claims and 25 percent

for IHE claims. Section 844 of the

PRWORA changes these rates by

amending section 16(a) of the FSA (7

U.S.C. 2025(a)) to replace the current

rates with 35 percent retention for IPV

claims and 20 percent retention for IHE

claims. In addition, as indicated in

section 13 of the newly amended FSA

(7 U.S.C. 2025), if an IHE claim is

collected via unemployment

compensation, that collection would

also have a 35 percent retention rate.

The Department is proposing, in

§ 273.18(m) of this rule to make the

adjustments in the rates accordingly.

Submission of Payments

Current regulations at 7 CFR 273.18(i)

discuss the procedures for the

submission of State agency payments for

claims collections to FNS and payments

from FNS to the State agency. The only

change that the Department is proposing

in this area is to eliminate the State

agency option of receiving a Federal

check for payment of claims collection

retention and replace it with electronic

funds transfer. The Department is

proposing this change to comply with

the DCIA. The DCIA requires Federal

agencies to convert from checks to

electronic funds transfer. In addition, as

part of the regulatory reorganization,

much of the prescriptive language

would be removed and this paragraph

would be moved to § 273.18(n) in this

proposed rule.

The current regulations at 7 CFR

273.18(i)(4) discuss providing refunds

for overpaid claims. As part of the

regulatory reorganization, this is broken

out into its own paragraph, § 273.18(j),

in the proposed rule.

Bankruptcy

Current regulations at 7 CFR 273.18(k)

discuss the procedures for proceeding

against households with claims which

file for bankruptcy. The current policy

authorizes State agencies to act on

FNS’s behalf to recover claims when

households file for bankruptcy. The

Department is not proposing to make

any changes in policy regarding this

area of the regulations. However, as part

of the regulatory reorganization, this

paragraph would be moved to

§ 273.18(l) in this rule.

Accounting Procedures

Current regulations at 7 CFR 273.18(l)

discuss the accounting requirements

and procedures to be maintained by

State agencies. Further procedural

clarification is being provided on this

issue and this paragraph is being moved

to in § 273.18(o) in this rule.

Interstate Claim Collection

Current regulations at 7 CFR

273.18(m) discuss the continuation of

collection action against households

that have an outstanding claim and

move from one State agency’s

jurisdiction to another. The regulations

state that a receiving State agency

should initiate or continue collection

action when it ascertains that the

originating State agency does not intend

to pursue collection. Feedback received

from State agencies indicates that this

policy has not been successful in

recovering interstate claims and needs

to be strengthened to assure cooperation

among State agencies. A number of State

agencies have entered into claimtransferring agreements among

themselves on their own initiative but it

has not been a nationwide effort. This

has resulted in a household being able

to avoid paying its claim simply by

relocating to another State. Federal tax

refund offset does address this issue to

some extent by conducting a nationwide

search and subsequently collecting

claims against household members

regardless of where they currently

reside. However, Federal tax refund

offset is limited to those households

with members who file a Federal

income tax return and are due a refund.

The Department believes that food

stamp recipient claims, as Federal debts,

should be more vigorously pursued by

State agencies when households move

across State borders. Therefore, the

Department is proposing to amend 7

CFR 273.18(m) by breaking it out into

separate paragraphs to specifically

outline the responsibilities of the

originating and receiving State agencies.

This amendment is intended to

maximize collection potential while

maintaining State agency flexibility.

The Department is proposing that,

unless an actual interstate transfer takes

place, the originating State agency will

continue to have the responsibility for

collection action on any recipient claim

regardless of whether the household

remains in its jurisdiction. State

agencies, however, would be able to

formally transfer this responsibility for

individual claims to receiving State

agencies under certain circumstances.

The types of interstate transfers being

proposed are discussed in the

succeeding paragraphs of this preamble.

To strengthen the interstate claim

collection process for participating

households, the Department is

proposing to further amend 7 CFR

273.18(m) to require that a State agency

must accept the transfer of the

remaining balance of any claim from

another State agency if it is discovered

that the household is participating in

the FSP in the receiving State. This

ensures efficient claims collection since

allotment reduction, a highly effective
Federal Register / Vol. 63, No.102 /Thursday, May 28, 1998 / Proposed Rule 29317

collection tool, is available to the

receiving State agency. Once the transfer

takes place, the claim would then no

longer be the responsibility of the

originating State agency and the

receiving State agency would be able to

retain any applicable retention amounts

for subsequent collections. The

amended regulatory text being proposed

is being designated as its own

paragraph, § 273.18(k)(3) in the

proposed rule.

In addition, to facilitate this process,

the Department is proposing, in a new

paragraph, § 273.18(k)(2), to require that

State agencies timely respond to

inquiries concerning household

participation received from State

agencies who have reason to believe that

a household or adult members of a

household with an outstanding claim

have relocated to that State. A response

would be considered timely if a

determination is made within 30 days.

If an examination of the receiving State

agency’s caseload does reveal that the

household (or any of its adult members)

are, in fact, receiving benefits in that

State, the State agency would then

accept the transfer of the claim balance

from the originating State agency and

continue collection action efforts

including allotment reduction. The

receiving State would keep any

retention amounts for transferred

claims.

The Department is also proposing to

add another new paragraph,

§ 273.18(k)(4), to allow, but not require,

receiving State agencies to accept the

transfer of any claim if the household is

not participating. This policy is being

maintained to maximize flexibility as

well as facilitate the new claim

termination process being proposed in

another section of this rule.

Federal Claim Collection Methods

(FCCM’s)

This rule proposes changes to current

regulations on FTROP and FSOP. These

changes are proposed to incorporate

certain legislative changes and to

implement certain other changes based

on experience operating these programs.

The Department believes that these

changes will enhance the collection of

recipient claims and will make that

collection more efficient, especially for

State agencies. In summary, these

changes would:

—Require all State agencies to use

FCCM’s (unless the methods are

shown to be not cost beneficial).

—Require that all claims that meet the

criteria, including AE claims, be

submitted for collection under FCCM.

—Provide that claims may be collected

by FTROP and/or administrative

offset (ADOP), or by FSOP and/or

ADOP.

—Provide that FTROP 60-day notices

and FSOP advance notices advise

debtors that their claims are subject to

ADOP.

—Comply with the hearing

requirements for ADOP with the

hearing opportunities currently

provided under FTROP and FSOP.

Federal Claim Collection Methods

(FCCM’s)

This rule would introduce the phrase

‘‘Federal claim collection methods’’ and

its acronym ‘‘FCCM’s’’ at § 273.18(p)(1).

Currently there are two such collection

methods, FTROP and FSOP. As

discussed later in this preamble, this

rule is proposing an additional

collection method that would be

operated at the Federal level. The new

method is ADOP. There are several

policies and procedures that would

become common to these three

collection methods. As discussed in this

preamble several paragraphs below,

FNS plans to develop a single manual

which for all three programs would

contain such things as computer system

record layout and production schedules

and guidance on procedures for

handling special cases and for fiscal and

accounting matters. The rule would also

specify that under FCCM’s State

agencies would retain their recipient

claims responsibilities, that would

provide certain information on claims

subject to FCCM’s and would receive

amounts collected based on the

currently authorized retention rates.

Mandated Participation

Section 844 of PRWORA amended

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

2022(b)) to require that, unless State

agencies can demonstrate that the

methods are not cost effective, they

must collect overissued food coupons

(recipient claims) from Federal pay or

Federal income tax refunds.

Currently, these two collection

methods, FTROP and FSOP are optional

for State agencies. Regulations at 7 CFR

273.18(g)(5)(i) provide that State

agencies which choose to implement

FTROP must submit an amendment to

their Plan of Operation stating that they

will comply with FTROP regulations.

Choosing to implement FTROP entails

implementing FSOP because current

regulations at 7 CFR 273.18(g)(6)(i)

provide that all claims submitted for

FTROP are also subject to FSOP. This

rule proposes to delete the language on

State agency option to implement

FTROP. At § 273.18(p)(2)(i), the rule

would require that all State agencies

submit all claims which meet certain

criteria for collection by FCCM’s.

Mandatory implementation of FCCM’s

will affect few State agencies. In

calendar year 1998, of the 52 State

agencies who could use FCCM’s, 47 are

doing so. As discussed under the

paragraph on Implementation at the end

of this preamble, this rule would be

required to be implemented 180 days

after its publication is final. The

Department expects that this

implementation period would be

sufficient for State agencies to

implement FCCM’s during calendar year

1999.

Consistent with mandatory

implementation of FCCM’s, this rule

proposes deleting the requirement (in

current rules at 7 CFR 272.2(a)(2) and

(d)(1)(xii) and 7 CFR 273.18(g)(5)(i)(A))

that State agencies choosing to

implement FTROP and FSOP submit an

amendment to their Plan of Operations.

Administrative Offset

Prior to the DCIA, under

administrative offset, debts owed by

persons to the Federal government are

collected from payments due those

persons from the Federal government.

The DCA at 31 U.S.C. 3716 as amended

by the DCIA greatly expanded the

Federal government’s authority to

collect Federal debts through ADOP.

The Department believes that

implementing the DCIA’s provisions

relating to ADOP would significantly

enhance collection of FSP recipient

claims. First, the amended DCA at 31

U.S.C. 3716(c)(1)(A) requires that, with

certain exceptions, disbursing officials

of Federal government agencies must at

least annually offset from Federal

payments claims submitted by creditor

agencies. Heretofore, while there has

been general authority for

administrative offset, there has not been

a general requirement that Federal

payments due to individuals be offset

against debts those individuals owe the

Federal Government. Second, the

amended DCA at 31 U.S.C.

3716(c)(3)(A)(ii) provides that, except

for a $9,000 annual exemption, all

payments due a debtor under the Social

Security Act are subject to ADOP. Third,

the amended DCA at 31 U.S.C. 3716(c)

centralized the ADOP procedures in a

single Federal agency, the Department

of the Treasury.

Accordingly, as discussed in detail

later in this preamble, this rule proposes

to add ADOP to FTROP and FSOP by

modifying the required due process and

privacy notices to notify the debtor that,

in addition to being subject to collection

from tax refunds and Federal wages, the

claim in question is also subject to
29318 Federal Register / Vol. 63, No.102 /Thursday, May 28, 1998 / Proposed Rule

collection from other payments due the

debtor from the Federal government.

The Department expects that there will

be little work impact on State agencies

related to referring claims for ADOP.

FNS will refer for collection by ADOP

claims submitted by State agencies.

FSOP claims referred to FNS for notices

of intent which are referred for

collection from Federal salaries will also

be referred for collection by ADOP.

Funds collected through ADOP will be

transferred to State agencies and

reported with FTROP and FSOP

collections. Current regulations on

FTROP specify update requirements for

State agencies, and FNS has provided

State agencies update procedures for

FSOP. This rule proposes a general

requirement for updating records of

claims submitted for collection through

FCCM’s.

Cross Servicing

The amended DCA at 31 U.S.C.

3711(g) requires that debt delinquent

over 180 days be transferred to the

Secretary of the Treasury for ‘‘cross

servicing.’’ Under cross servicing, the

Department of the Treasury (Treasury)

would pursue a variety of claims

collection actions such as referring the

claim under FTROP and FSOP. Treasury

would refer debts to debt collection

centers (selected Federal agencies)

which would pursue these actions.

The Department is currently working

with Treasury to determine the best way

to implement this collection strategy. As

such, this rule does not propose adding

procedures for cross servicing at this

time.

Claims Subject to FCCM’s

As part of administrative offset

provisions, the amended DCA now

requires at 31 U.S.C. 3716(c)(6) that any

Federal agency that is owed a past due,

legally enforceable nontax debt that is

over 180 days delinquent, including

nontax debt administered by a third

party acting as an agent for the Federal

Government, must notify the Secretary

of the Treasury of all such debt for

purposes of administrative offset

(emphasis added). Currently, rules for

FTROP and Salary Offset set criteria for

claims which may be submitted for

collection under these procedures. This

rule proposes that, subject to two

conditions discussed just below, all

delinquent recipient claims be

submitted for collection under FCCM’s.

The Department is proposing this

requirement because FCCM’s are

extremely effective. For example, net

dollar collections under FTROP

(voluntary payments and collections

from Federal tax refunds less offset fees

and Treasury reversals) exceed 20

percent of the dollar value of claims

submitted. FSOP offers the only way to

locate and pursue collection against the

salaries of Federal employees who are

liable for overissued food stamp

benefits. (The Internal Revenue Service

(IRS) currently prohibits referral of

debts for FTROP which can be collected

from Federal employees’ salaries.)

Finally, and especially with the

addition of ADOP, FCCM’s provide

State agencies access to sources of

significant collections not otherwise

available to them.

In addition, this rule proposes that,

unless no liable individual can be

located, State agencies must pursue one

or more State agency claim collection

method before submitting a claim for

collection under FCCM’s. The rule

proposes to specify that demand letters

sent to liable individuals at the most

current address known to the State

agency and returned as undeliverable

would be sufficient to show that no

liable individual could be located. The

requirement for State agency collection

initiative as a condition to the use of

FCCM’s is being proposed to make the

procedures for the other components of

FCCM consistent with the FTROP

requirement that the (Federal) agency

satisfy the Secretary of the Treasury that

the agency has made reasonable efforts

to obtain payment of the debt. (See 31

U.S.C. 3720A(b)(4).) In addition, the

Department believes that it is most

efficient for State agencies to attempt

collection action with methods available

to them and that if those methods are

not successful relatively soon after

initiation, debts should be referred for

collection through FCCM’s.

As stated above, the amended DCA at

31 U.S.C. 3711(c)(6) requires that claims

180 days delinquent be submitted for

ADOP. State agencies are establishing

claims at a rate of over 775,000 per year.

To have a State agency submit each

claim for FCCM’s as soon as that claim

is 180 days delinquent is not

administratively or logistically possible

at this time. Therefore, the Department

is proposing that State agencies be

required to submit claims for FCCM’s at

intervals to be determined by the

Department. The Department will

continue to work with Treasury to fine

tune this process to implement this

aspect of the DCIA.

Accordingly, this rule proposes at

§ 273.18(p)(1)(i) that all claims would be

subject to collection by FCCM’s only

after the State agency has initiated one

or more State agency collection

methods. The rule also proposes that the

requirement for a State agency

collection effort will not apply when no

liable individual can be located as

indicated by such evidence as demand

letters returned as undeliverable.

Finally, in this regard, the rule proposes

that State agencies must submit all

delinquent claims for collection by

FCCM’s.

Procedures and Schedules

Current rules at 7 CFR

273.18(g)(5)(i)(B) specify that State

agencies submit data for FTROP to FNS

in the record formats specified by FNS

and/or Treasury, and according to

schedules and by means of magnetic

tape, electronic data transmission or

other method specified by FNS. This

rule proposes to apply these procedures

to FCCM’s in general.

This rule would require that, in

addition to following computer datarelated guidance, State agencies follow

other technical and procedural

guidelines as specified by FNS. During

the testing of FTROP and FSOP, FNS

conducted several national training

sessions during which FNS provided

substantial guidance on computer

system operations, policy requirements

and the financial reporting and funds

processing for FTROP and FSOP.

Following the training sessions, FNS

provided packages of written responses

to questions raised during the sessions.

On an ongoing basis, FNS responds to

numerous questions from State agencies

concerning how to handle particular

cases with respect to computer systems,

collection policies and financial and

accounting procedures. FNS sees a need

to continue to provide this material so

that all staff, Federal and State agency,

involved with different aspects of

FCCM’s, have a single, consolidated

operations manual.

This manual will be called the

‘‘Manual for Federal Claims Collection

Methods for the Food Stamp Program’’

(the FCCM manual). The basis of the

FCCM manual would be the current

manual used for FTROP and FSOP data

management (the Federal Debt

Collection Program Revenue Procedure

Manual 1997). As is the case with the

current manual, the FCCM manual

would be a vehicle for providing

technical guidance for complying with

established regulatory requirements.

(See § 273.18(p)(1)(ii).)

Identification of Type of Claims

Currently State agencies are not

required to identify the type of claim

submitted for FTROP and FSOP. This

rule proposes to require that claims

submitted for collection under an FCCM

be identified as an IPV, IHE or AE claim.

Instructions on how to make such

identification will be provided in the
Federal Register / Vol. 63, No.102 /Thursday, May 28, 1998 / Proposed Rule 29319

FCCM Manual. The new information

would be included in currently required

data submissions and record formats.

The rule proposes this new requirement

because, effective with implementation

of this rule, for collection made under

FCCM’s, FNS intends to transfer to State

agencies the dollar amount of each

collection to which the State agency is

entitled based on current retention rates

for each type of claim. Currently, FNS

transfers gross collections net of IRS fees

from FTROP and FSOP to State

agencies. State agencies then report

these collections to FNS on the FNS–

209, Status of Claims Against

Households, retain the percentage of the

collections to which they are entitled

under section 16(a) of the FSA (7 U.S.C.

2025(a)) and transfer appropriate

amounts back to FNS. With annual

FTROP collections of about $40 million,

this process results in significant

amounts of Federal funds not being as

promptly transferred to Treasury as they

could be.

Current rules allow State agencies to

combine claims for an individual into

one claim in order to try to collect on

all of the claims through FTROP or

FSOP. This rule would require that for

any claim submitted for collection

under FCCM’s which is a combination

of more than one type of claim, the State

agency must specify the dollar amounts

due to each type of claim.

File Updates

Current rules at 7 CFR

273.18(5)(ix)(A) require that for FTROP

purposes State agencies update Treasury

files. As discussed above, this rule

proposes to make that requirement

apply to FCCM’s in general.

Accordingly, this rule at

§ 273.18(p)(1)(iv) proposes to require

that, as instructed in the FCCM manual,

State agencies must update files by

reducing the amounts of and deleting

claims to reflect payments received, and

by deleting claims which for other

reasons are no longer subject to

collection.

Hierarchy of Collection Methods

The mechanisms for ADOP are

currently being developed.

Consequently, the Department expects

that until those mechanisms are in

place, claims submitted for collection

under FTROP and FSOP will be

collected through those methods before

any remaining debt is collected through

ADOP from other Federal payments.

Once ADOP is operational, a debt

submitted under FTROP, for example,

might be collected from another Federal

payment if that payment was identified

and available before the tax refund was

offset. Accordingly, this rule proposes to

state at § 273.18(p)(2)(v) that claims

submitted under FCCM’s would be

offset from Federal payments due to

debtors as such payments are identified

and are available for offset.

Federal Income Tax Refund Offset

Program (FTROP)

Among other things, this rule

proposes to simplify the statement of

criteria for claims subject to collection

under FTROP, shorten and restructure

the 60-day notice to eliminate

unnecessary material, and to clarify that

the 60-day notice is a demand for

payment of a debt.

Limitation to IPV and IHE Claims

Current rules at 7 CFR

273.18(g)(5)(ii)(A)(1) limit the types of

claims subject to FTROP to IPV and IHE

claims. As discussed earlier in this

preamble, section 844(a) of the

PRWORA amended the FSA to provide

that, subject to a State agency’s

demonstration that the collection

method is not cost effective, all claims

collection methods must be applied to

all types of claims. Accordingly, this

rule proposes to remove the limitation

of FTROP to IPV and IHE claims.

Properly Established Claims

The regulatory paragraph cited just

above also specifies that claims

submitted under FTROP must be

properly established no later than the

date the State agency transmits its final

request for Treasury addresses for the

particular offset year. This requirement

was made to assure that claims are not

referred for collection under FTROP

unless and until an individual has had

an opportunity for a fair hearing and

any fair hearing decision is reached. As

discussed above, this rule proposes at

§ 273.18(g)(6) to require that State

agencies cease any collection action

upon timely receipt of a fair hearing

request. Accordingly, this rule proposes

not to reiterate the proposed

requirement with respect to FTROP.

Required Documentation

The same regulatory paragraph cited

above also elaborates on the records

required for properly established claims.

The Department believes that this

language is unnecessary. State agencies

will develop and retain appropriate

records of their claims activities as a

result of the various requirements for

those activities proposed in this rule. In

addition, the current regulations at 7

CFR 272.1(f) already require state

agencies to retain fiscal records and

accountable documents for 3 years from

the date of fiscal or administrative

closure. This rule does not propose any

changes to this policy. Accordingly, this

rule proposes not to state a records

requirement specifically for FTROP or

any other FCCM.

Collection From All Liable Parties

Current rules at 7 CFR

273.18(g)(5)(ii)(A)(2) specify that for a

claim to be subject to FTROP the State

agency must have verified that no

individual who is jointly and severally

liable for the claim is also currently

participating in the FSP in the State.

Since claims owed by participating

households must be recouped from the

monthly allotment, this requirement

prohibited the simultaneous collection

of a claim from a participating

household through recoupment and

from nonparticipating household

members through FTROP.

State agencies objected to this

restriction. They argued that with the

restriction the entire burden of paying

the claim fell on participants. State

agencies also objected to the restriction

because collection solely by recoupment

meant that claims were often paid more

slowly than they could be when there

were liable, nonparticipating

individuals with Federal tax refunds.

This rule proposes at § 273.18(i)(1)(v) to

allow simultaneous collection through

recoupment from liable, participating

households and through other means

from liable, nonparticipating

individuals. In addition, this rule

proposes at § 273.18(i)(1)(i) to prohibit

additional involuntary collection from

individuals who are in households

subject to allotment reduction.

Accordingly, the rule proposes to delete

from current rules the requirement that

for a claim to be subject to FTROP the

State agency must have verified that no

individual who is jointly and severally

liable for the claim is also currently

participating in the FSP in the State.

Concurrent Collection Efforts

Current rules at 7 CFR

273.18(g)(5)(ii)(A)(5) state that claims

are not subject to FTROP if the State

agency is receiving either regular

voluntary payments or involuntary

payments such as wage garnishment. In

addition, the rule specifies that claims

for which a State agency has been

receiving regular payments (either

voluntary or involuntary) are considered

past due and legally enforceable (and so

are subject to FTROP) if the individual

does not respond to a notice of default.

As discussed earlier in this preamble,

this rule proposes at 7 CFR 273.18(i)(7)

that State agencies may continue (Statebased) collection efforts on claims after

submitting them for collection under
29320 Federal Register / Vol. 63, No.102 /Thursday, May 28, 1998 / Proposed Rule

FCCM’s. Accordingly, this rule proposes

to eliminate the requirement that claims

cannot be submitted for FTROP if the

State agency is receiving voluntary or

involuntary payments such as wage

garnishment.

Under provisions related to voluntary

payments which this rule proposes at 7

CFR 273.18(i)(4), there would no longer

be a requirement that State agencies

send households which fail to make

scheduled payments a notice and an

opportunity to renegotiate the payment

agreement.

No Reduction in the Dollar Amounts

Submitted

Current rules at 7 CFR

273.18(g)(5)(ii)(B)(1) require that all

claims submitted for collection under

FTROP must be reduced by any

amounts subject to collection from State

income tax refunds or from other

sources which may result in collections

during the offset year. This rule

proposes to eliminate this provision

because, as discussed above, this rule

proposes to allow State agencies to

continue to pursue State agency

collection efforts on claims submitted

for collection under FCCM’s. State

agencies will have an increased

responsibility to maintain adequate

records of collections in order to

minimize over collections and to

promptly refund any which might

occur.

Claims Apportioned Among Two or

More Individuals

Current rules at 7 CFR

273.18(g)(5)(ii)(B)(3) provide that if a

claim submitted under FTROP is

apportioned between two or more

individuals who are jointly and

severally liable for the claim, the sum of

the amounts submitted cannot exceed

the total amount of the claim. This rule

proposes to eliminate this provision.

The apportioning of a claim as

prescribed in this provision was

required to conform to an informal IRS

policy. The Department believes that the

provision for joint and several liability

established by section 13(a)(2) of the

FSA (7 U.S.C. 2022(a)(2)) establishes the

Department’s authority to pursue a

claim’s full amount from all liable

adults until the claim is paid. Debtors

are protected by the requirement for

State agencies to promptly post records

and provide refunds of any over

collections as this rule proposes at

§ 273.18(j).

All Delinquent Claims

Current rules at 7 CFR 273.18(g)(5)(ii)

provide that State agencies may submit

claims for collection under FTROP

recipient claims which are past due and

legally enforceable. As discussed above,

this rule would require that all claims

which are delinquent and have been

subject to one or more State agency

collection methods are subject to

collection under FCCM’s. Accordingly,

this rule proposes to state at

§ 273.18(p)(2)(i) that State agencies must

submit for collection all recipient claims

which are delinquent, which are legally

enforceable and which meet the criteria

specified in the subsequent

subparagraphs.

Minimum Dollar Value

Current rules at 7 CFR

273.18(g)(5)(ii)(A)(3) require that claims

submitted under FTROP must meet at

least the minimum dollar amount

established by Treasury. This minimum

continues to be $25. This rule would

make no change in this requirement.

FNS would advise State agencies if the

Treasury minimum changes. The

requirement is stated at

§ 273.18(p)(2)(i)(A) in this proposed

rule.

10-year Limit

Current rules at 7 CFR

273.18(g)(5)(ii)(A)(4) require that claims

submitted under FTROP must be claims

for which the date of the initial demand

letter is within 10 years of January 31

of the offset year, except that claims

reduced to final court judgments

ordering individuals to pay the debt are

not subject to this 10-year limitation.

This rule proposes no changes in this

requirement, which is stated at

§ 273.18(p)(2)(i)(B).

Voluntary Payments

As discussed above, this rule

proposes to state at 7 CFR 273.18(i)(1)(i)

that individuals in households subject

to allotment reduction are not subject to

involuntary collection by any other

means. As also discussed above, this

rule proposes at § 273.18(i)(1)(v) that

collection via allotment reduction does

not preclude additional collection

methods being pursued against other

liable individuals not currently

members of a participating household.

The Department wants to make clear

how these policies apply to collection

under FTROP. Accordingly, this rule

proposes at § 273.18(p)(2)(i)(C) that

claims submitted under FTROP cannot

include any claim which is submitted

for collection from an individual in a

household which is subject to allotment

reduction.

Bankruptcy

The current rule at 7 CFR

273.18(g)(5)(ii)(A)(6) specifies that

claims for which collection is barred by

a bankruptcy are not subject to FTROP.

With the exception of redesignating this

paragraph as § 273.18(p)(2)(i)(D), this

rule proposes no change to this

provision.

All Required Notices

The current rule at 7 CFR

273.18(g)(5)(ii)(A)(7) requires that for a

claim to be subject to FTROP the State

agency must have provided the

individual all the notices required. FNS,

not the State agency, provides one of

those notices after the FNS decision on

a request for a hearing. Accordingly, this

rule would remove the reference to the

State agency in the current criteria.

Further this rule proposes that the

criterion for referral under FTROP and

FCCM would be that claims are subject

to referral for which individuals have

been provided the opportunities for

review and the notifications specified in

paragraphs (p)(2)(iii), (p)(2)(iv), and

(p)(2)(v). (See § 273.18(p)(2)(i)(E).)

Combined Claims

Current rules at 7 CFR

273.18(g)(5)(ii)(B)(2) provide that if a

claim to be submitted for collection

under FTROP is a combination of two

or more recipient claims, the date of the

initial demand letter for each claim

combined must be within the 10-year

range and that claims reduced to

judgment shall not be combined with

claims which are not reduced to

judgment. This rule proposes to retain

this provision. (See § 273.18(p)(2)(ii).)

Proposed Changes in the General

Requirements and Contents of the 60-

day Notice

The proposed rule would combine the

general requirements for 60-day notices

and the requirements for contents of the

notices (currently in paragraphs 7 CFR

273.18(g)(5) (iii) and (iv)) into a single

paragraph, § 273.18(p)(2)(iii). The

overall goal in this proposed rule is to

enable a single 60-day notice to serve as

notification for FTROP, FSOP, ADOP

and any other FCCM. In addition, the

rule proposes to delete several

provisions which are obsolete or

extraneous, and proposes to change

certain provisions. These proposed

deletions and changes are discussed in

the following paragraphs. The

Department believes that the 60-day

notice will be most effective if State

agency notices present the proposed

required contents in the order they

appear in the regulation.
Federal Register / Vol. 63, No.102 /Thursday, May 28, 1998 / Proposed Rule 29321

Implementing Guidelines for 60-day

Notices

Current rules at 7 CFR

273.18(g)(5)(iii)(A) specify requirements

for 60-day notices related to

implementing the current rule. That

material is obsolete, and this rule

proposes to delete it. For the same

reason, this rule proposes to delete the

last sentence of 7 CFR

273.18(g)(5)(iii)(B), and the introductory

clause of 7 CFR 273.18(g)(5)(iv).

State Agency Records

Current rules at 7 CFR

273.18(g)(5)(iv)(A) require that the 60-

day notice state that the State agency

has records documenting that the

individual, identified by name (and

Social Security Number), is liable for a

specified unpaid balance of a recipient

claim resulting from overissued food

stamp benefits. The Department believes

that it is unnecessary for the 60-day

notice to state that the State agency has

records which they are required to

develop in the course of establishing

and acting on recipient claims. The

Department presumes that State

agencies have the necessary records to

support their claims. Accordingly, the

rule proposes to delete the language on

this matter in the just cited paragraph.

One of the requirements in the

amended DCA at 31 U.S.C. 3716(a) for

collecting a claim by ADOP provides the

debtor with the right to inspect and

copy agency records relating to the

claim. This right is covered under the

fair hearing and administrative

disqualification hearing procedures and

is available to the debtor when the claim

is initially established. Moreover, the

debtor would be provided notice of this

right under the notice requirements for

demand letters as discussed previously

in this proposed rule. The current

regulations regarding fair hearings (7

CFR 273.15) and administrative

disqualification hearings (7 CFR 273.16)

are not affected by this proposed rule.

Previous Actions Taken

In the second sentence of 7 CFR

273.18(g)(5)(iv)(A), current rules require

that the 60-day notice state that the

State agency has previously mailed or

otherwise delivered demand letters

notifying the individual about the claim,

including the right to a fair hearing on

the claim, and has made any other

required collection efforts. This

requirement was made to comply with

the requirement in DEFRA that the

(Federal) agency satisfy the Secretary of

the Treasury that the agency has made

reasonable efforts to obtain payment of

the debt. (See 31 U.S.C. 3720A(b)(4).)

The Department believes that this

requirement is met by the requirement

proposed in this rule and discussed

above under which State agencies must

pursue State agency collection methods

before referring claims for collection

through FCCM’s. In addition, the

Department does not believe that

debtors need the information since they

would have already received demand

letters and other billing actions.

Accordingly, this rule proposes to delete

the language in question.

Statement on Joint Liability

Current rules at 7 CFR

273.18(g)(5)(iv)(D) require that the 60-

day notice advise individuals that all

adults who were household members

when excess food stamp benefits were

issued to the household are jointly and

severally liable for the value of those

benefits, and collection of claims for

such benefits may be pursued against all

such individuals. The Department

believes that questions about this policy

are being effectively answered in

telephone conversations between

debtors and State agencies and that

inclusion of the statement of the subject

policy unnecessarily lengthens the 60-

day notice. In addition, the initial

notification of claim or demand letter

would already include the jointly and

severally language. Accordingly, this

rule proposes to delete the currently

required language on this matter from

the 60-day notice.

Statement on Voluntary and Involuntary

Payments

Current rules at 7 CFR

273.18(g)(5)(iv)(E) require that the 60-

day notice state that State agency

records do not show that the claim is

being paid according to either a

voluntary agreement or through

scheduled, involuntary payments. The

language in question was added to the

60-day notice in the rulemaking at 60

FR 45990–46001, dated September 1,

1995. The language was added in

response to a public interest group’s

concern that debtors be informed of this

policy.

As discussed above, this rule

proposes allowing State agencies to

pursue collection through FTROP,

FSOP, ADOP and other FCCM’s while

pursuing other collection efforts except

against individuals in households

subject to allotment reduction. In

addition, at § 273.18(p)(2)(i)(C) the rule

would prohibit referring claims for

FTROP collection from individuals

subject to allotment reduction.

Furthermore, in operating FSOP the

Department has found that, in response

to notices of intent issued under that

collection procedure, debtors who are

paying the claim call and advise FNS of

that fact. The Department believes that

the same issue can be resolved over the

telephone between debtors and State

agencies under FTROP. Accordingly,

this rule proposes not to require the

language currently required at 7 CFR

273.18(g)(5)(iv)(E).

Summary of Criteria

Current rules in paragraphs 7 CFR

273.18(g)(5)(iv)(I), (J) and (K) require

that the 60-day notice include

information intended to inform

individuals about the criteria for claims

which are subject to FTROP and what

information they should provide to

request a hearing on the intended

collection action. These requirements

were made in order to both assist

individuals in understanding the

intended collection action and to reduce

State agency workload associated with

telephone calls in response to 60-day

notices. The Department does not

believe that either of these purposes

were achieved by the additional

information, that individuals’ continued

to telephone State agencies and that

their concerns were adequately dealt

with through that form of

communication. Accordingly, this rule

proposes deleting the just cited

paragraphs.

The Notice Would Advise

Current rules at 7 CFR

273.18(g)(5)(iii)(B) require that with the

exception of such State-specific

information as names and job titles and

information required for State agency

contacts, a State agency’s 60-day notice

must contain only the information

specified in paragraph (g)(5)(iv). The

Department believes that it is adequate

to require that State agencies advise

individuals of the required information.

This approach should also provide State

agencies flexibility in the design of 60-

day notices and also facilitate their

production. Accordingly,

§ 273.18(p)(2)(iii)(B) requires that the

60-day notice advise debtors of the

matters listed in that paragraph.

Intent to Collect by Various Federal

Collection Methodologies

The rule proposes at

§ 273.18(p)(2)(iii)(B)(3) to include in the

60-day notice ADOP, as one of the

methodologies to which the debt is to be

referred. The other methodologies

which would utilize the same 60-day

notice are FTROP, FSOP and any other

FCCM.
29322 Federal Register / Vol. 63, No.102 /Thursday, May 28, 1998 / Proposed Rule

Collection of the Federal Offset Fee

Current rules at 7 CFR

273.18(g)(5)(iv)(C) require that the 60-

day notice state that if the State agency

refers the claim to the IRS, a charge for

the administrative cost of collection will

be added to the claim and that amount

will also be deducted if the claim, or

any portion of the claim, is deducted

from the debtor’s tax refund. This rule

proposes to modify this language to

include the cost of any Federally

imposed processing fee. (See

§ 273.18(p)(2)(iii)(B)(5).)

Citation of Authorities

The rule proposes to require language

to the effect that collection through

ADOP is authorized by the Debt

Collection Act of 1982, as amended 31

U.S.C. 3701, and that the 60-day notice

meets that statute’s requirements for

notice to debtors about ADOP. (See

§ 273.18(p)(2)(iii)(B)(7).)

Advice on Joint Tax Returns

Current rules at 7 CFR

273.18(g)(5)(iv)(H) require that the 60-

day notice provide substantial guidance

concerning jointly filed Federal income

tax returns and offsets from tax refunds.

The Department is concerned that some

of the language may be inappropriately

providing information about filing

income tax returns. In addition, the

Department wants to point out that IRS

rules concerning FTROP at 26 CFR

301.6402–6(i) state that the IRS will

advise non-debtor spouses of steps to

take to protect their share of tax refunds

and will refund to such persons such

shares that are offset. Consequently, the

Department believes that the proposed

changes will not adversely affect

spouses of debtors who are not liable for

the overissued food stamp benefits.

Accordingly, the rule proposes to

require that 60-day notices advise

debtors that, if they are filing a joint

Federal income tax return, they may

want to contact their local office of the

IRS. (See § 273.18(p)(2)(iii)(B)(9).) In

addition, this rule proposes to delete

from the current required language the

sentence discussing spousal liability.

The rule also proposes to delete the

sentence concerning liability for

Treasury offset fees. The Department

believes that the paragraph already

required on Treasury offset fees

information provides adequate

information on this matter.

Statement of Compliance

Current rules at 7 CFR

273.18(g)(5)(iii)(B) require that in their

annual certification letters State

agencies include a statement that their

60-day notices conform to the content

requirements of that paragraph. This

rule proposes to require that State

agencies include in their annual

certification letter a statement that their

60-day notices comply with the

requirements of § 273.18(p)(2)(iii)(B).

(See § 273.18(p)(2)(iii)(C).)

Mailing Schedule

Current rules at 7 CFR

273.18(g)(5)(iii)(C) require that unless

otherwise notified by FNS, the State

agency must mail 60-day notices for

claims to be referred for collection

through FTROP no later than October 1

preceding the offset year during which

the claims would be offset. The date for

such mailings in 1996 was September 1.

The Department expects that September

1 will continue to be the mailing date

for 60-day notices. Nonetheless, to avoid

confusion on this point, the rule

proposes to state that unless otherwise

notified by FNS, the State agency shall

mail 60-day notices for claims to be

referred for collection through FTROP,

FSOP, ADOP and other FCCM’s

according to the schedule provided by

FNS. (See § 273.18(p)(2)(iii)(D).)

Deletion of October 31 Cutoff for

Reviews

Current rules at 7 CFR

273.18(g)(5)(v)(E) provide that State

agencies may not refer claims for which

timely review requests are received

unless by October 31 they have

completed the review and notified the

individual that the claim is past due and

legally enforceable. This provision was

necessary when 60-day notices were

mailed on October 1 because of the

length of time necessary to offer the

opportunity for both State agency and

FNS reviews during an annual

processing cycle. Since 60-day notices

are now mailed on September 1, and in

the future may be mailed more

frequently than annually, this

requirement is now obsolete. This rule

proposes to delete this requirement.

Incorporation of Administrative Offset

Current rules at 7 CFR 273.18(g)(5)(v)

state the requirements for State agency

action in response to debtor requests for

review of intended collection action

under FTROP. The Department believes

that these requirements exceed the

requirements for such action under

ADOP. Accordingly, with the exception

of appropriate references, this rule

proposes no additional review

procedures for ADOP or any other

FCCM.

Notice of Potential Administrative

Offset

Current rules at 7 CFR

273.18(g)(5)(v)(C)(2) require that when

the State agency determines that a debt

is past due and legally enforceable the

State agency notice to the debtor advise

the debtor that the State agency intends

to refer the claim to Treasury for offset.

This rule proposes to require that the

notice of the State agency’s decision

state that the State agency intends to

refer the claim for collection from the

debtor’s Federal income tax refund and/

or from other payments which may be

payable to the debtor by the Federal

government.

No Referral for Federal Collection

Pending FNS Review

Under current rules at 7 CFR

273.18(g)(5)(iv)(F), the 60-day notice

provides debtors a 60-day period to

request that the State agency review

whether the claim in question is past

due and legally enforceable. The State

agency notice of its decision that a claim

is past due and legally enforceable must

advise the debtor that the debtor has 30

days to request that FNS review that

decision. The notice must also advise

the debtor that, pending FNS review,

the debt will not be referred to Treasury

for offset. The rule proposes to also

require that such notices advise debtors

that, pending the FNS decision, the

claim will not be referred for collection

from other payments which may be

payable to the debtor by the Federal

government.

Regional Office Address

Current rules at 7 CFR

273.18(g)(5)(v)(C)(4) require that the

State agency notice to the debtor

provide the appropriate FNS regional

office address, including the phrase

‘‘Tax Offset Review.’’ To reflect that the

review may pertain to ADOP situations,

this rule proposes to change that phrase

to ‘‘Offset Review.’’

FNS Action on Appeals of State Agency

Reviews

Current rules at 7 CFR 273.18(g)(5)(vi)

specify the actions which FNS will take

in response to appeals of State agency

review decisions. In several places in

this section, this rule proposes to

conform regulation citations to the

proposed rule. In addition, this rule

proposes to delete the clause in 7 CFR

273.18(g)(5)(v)(B) which sets the

condition that the State agency’s

decision be dated on or before October

31, and to delete paragraph (g)(5)(v)(C).

That paragraph currently provides that

for timely requests for FNS review of

State agency decisions made after
Federal Register / Vol. 63, No.102 /Thursday, May 28, 1998 / Proposed Rule 29323

October 31, FNS will complete its

review but the claim cannot be referred

under FTROP. The clause and the

paragraph coordinated with the October

31 cut-off discussed just above are also

obsolete because, under an annual

processing cycle, the 60-day notices are

being mailed September 1. All review

requests which FNS receives on State

agency decisions will be acted on.

Current rules provide at 7 CFR

273.18(g)(5)(v)(B)(2) that FNS will

advise the State agency if it does not

complete its review and the claim must

be deleted from the certified files. This

rule would not change that provision.

Referral of Claims for Offset

Current rules at 7 CFR

273.18(g)(5)(vii) specify requirements

for State agency submission of claims

under FTROP and the requirements for

the letter certifying that the claims

submitted meet the criteria for

collection under FTROP. This rule

proposes several changes in this

paragraph, which is § 273.18(p)(2)(vi) in

the proposed rule.

The rule proposes to add to the first

sentence of the current 7 CFR

273.18(g)(5)(vii)(A) a reference to

administrative offset and to change the

paragraph reference to conform to the

paragraph in the proposed rule.

The rest of current rules at 7 CFR

273.18(g)(5)(vii)(A) relate to the

certification letter. The proposed rule

would put this material in a new

paragraph, itemize the required contents

as subparts of that paragraph, change

the references to conform to the

paragraphs in the proposed rule, and

make editorial changes.

Section 273.18(g)(5)(vii)(A) requires

State agencies to submit certification

letters to FNS regional offices. State

agencies have found this instruction

confusing, some sending the letter with

their data files, some sending it to

regional offices. The rule proposes to

require that State agencies submit the

letter according to FNS instructions.

FNS plans to direct that the certification

letters be sent to FNS headquarters with,

or at the same time as certified files and

to provide in those instructions a

specific address for the letter. Also, the

requirement for the statement on the

conformance of the 60-day notice would

be changed to reflect the new

requirement discussed earlier in this

preamble. Finally, the requirement

currently at 7 CFR 273.18(g)(5)(vii)(B)

that State agencies include in their

certification letter how they determined

that the information about the State

agency contact for debtors is accurate

would be included in the list of required

contents for the certification letter.

Current rules at 7 CFR

273.18(g)(5)(vii)(B) require that the State

agency provide to FNS the name,

address and toll-free or collect

telephone numbers of State agency

contacts to be included in Treasury

notices of offset, and provide FNS

updates of that information if and when

that information changes. The rule

proposes to modify this requirement

with a reference to FNS instructions.

FNS intends to include such

instructions in the expanded Revenue

Manual.

State Agency Actions on Offsets Made

Current rules at 7 CFR

273.18(g)(5)(viii)(A) specify

requirements for State agency actions on

offsets made. For the reasons discussed

in the following paragraph, this rule

proposes to delete this section because

its contents repeat requirements which

this rule proposes to make elsewhere.

First, current rules at 7 CFR

273.18(g)(5)(viii)(A) require that State

agencies notify debtors about offsets.

This rule proposes at § 273.18(o)(4) to

require that State agencies keep debtors

advised of the status of their claims.

Also, the Federal agency from whose

payment the debt is offset would advise

the debtor of the offset.

Second, current rules at 7 CFR

273.18(g)(5)(viii)(B) require prompt

refunds for over collections due to

offsets from Federal income tax refunds.

As already discussed, this rule proposes

at § 273.18(j) to require that State

agencies promptly refund all over

collections of recipient claims

regardless of the source of the over

collection.

Third, current rules at 7 CFR

273.18(g)(5)(viii)(C) address several

matters relating to over collection and

refund situations due to State agency

error and Treasury reversals of offsets.

FNS periodically issues procedural

guidelines on these and related matters

and plans to continue to address such

matters in the FCCM Manual discussed

above in this preamble.

Monitoring and Reporting Offset

Activities

Current rules at 7 CFR 273.18(g)(5)(ix)

specify several requirements for State

agency reporting on offset activities. As

discussed in the following paragraphs,

this rule proposes to delete several of

those requirements because this rule

would state the requirements elsewhere.

The section would be renamed

‘‘Reporting FTROP and ADOP

activities.’’

As already discussed, this rule

proposes to make a general requirement

for the updating of files for FCCM’s.

Accordingly, this rule proposes to delete

paragraph (g)(5)(ix)(A). Paragraph (B) of

the section in question repeats the

requirement for prompt refunds of over

collections. This rule proposes to delete

it for reasons discussed earlier in this

preamble. Paragraph (E) of the section in

question reiterates the requirement that

State agencies report collections as

required for all recipient claims

collection. The rule proposes to delete

this restatement.

Current rules at 7 CFR

273.18(g)(5)(ix)(C) require that State

agencies annually report on 60-day

notices no later than the tenth of

October. This rule proposes to require

that State agencies make that report no

later than the ten days after mailing 60-

day notices. In paragraph (g)(5)(ix)(D),

this rule proposes to delete the reference

to the IRS. The rule proposes to require

that State agencies report on 60-day

notices, data security and voluntary

payments according to instructions in

the FCCM manual.

Federal Salary Offset Program (FSOP)

In addition to proposing changes in

the requirements for FSOP which are

intended to reduce workload on State

agencies and to eliminate provisions of

the current rule which are extraneous,

this rule proposes to reorder several

paragraphs of this regulations pertaining

to FSOP. Also, whenever possible, the

Department’s goal is to allow State

agencies to combine FSOP activities

with FTROP, ADOP, and other FCCM

activities.

Claims Subject to FSOP

Current rules at 7 CFR 273.18(g)(6)(i)

state that all claims submitted under

FTROP are subject to the salary offset

match and that all individuals identified

in the match are subject to FSOP

procedures. As discussed earlier in this

preamble, this rule proposes to require

that State agencies submit all

appropriate claims for collection under

FCCM’s thereby combining the FSOP

advance notice with the FTROP and

ADOP 60-day notice. Accordingly, this

rule proposes to delete this paragraph as

redundant.

Supplemental Information

Current rules at 7 CFR

273.18(g)(6)(iii)(C)(1) specify certain

information which State agencies are

encouraged to include in their advance

notices. The Department believes that

including such information may

improve the credibility of the advance

notice, but since the Department does

not want to require that the information

be included in the advance notice, this
29324 Federal Register / Vol. 63, No.102 /Thursday, May 28, 1998 / Proposed Rule

rule proposes to delete the subject

language.

Notice of Review Decision

Current rules at 7 CFR

273.18(g)(6)(iii)(C)(5) require that the

advance notice state that the State

agency will notify debtors in writing

when, due to a review decision, claims

will not be referred for collection from

salaries. The Department does not

believe that the advance notice needs to

advise debtors about the requirements

for State agency notification of review

decisions. Accordingly, this rule

proposes to delete the requirement for

language on this matter from the

advance notice.

Notice of Right to a Federal-level

Hearing

Current rules at 7 CFR

273.18(g)(6)(iii)(C)(5) also require that

the advance notice state: (1) that debtors

have the right to a formal appeal to FNS;

and (2) that notification about how to

make such appeals is required and will

be provided to debtors before any

collection action from salaries is taken.

The Department believes that the notice

of intent which is provided to debtors

prior to referral of claims for collection

from Federal salaries provides adequate

notice of the right to a hearing and

related matters. Accordingly, this rule

proposes to delete the requirement that

the advance notice provide information

about such matters.

Reporting

Current rules at 7 CFR

273.18(g)(6)(iv)(A) specify requirements

for State agency retention of collections,

reporting and about how FNS will

report and transfer collections to State

agencies. For the reasons discussed

earlier in this preamble in relation to the

proposed deletion of these same

requirements for FTROP, this rule

proposes to delete this paragraph.

FNS Recipient Claims Matching

Procedures

Current rules at 7 CFR

273.18(g)(6)(ii)(A) describe certain FNS

recipient claims matching procedures.

This rule would include this material

unchanged at § 273.18(p)(3)(i).

Security and Confidentiality

Current rules at 7 CFR

273.18(g)(6)(ii)(B) require that State

agencies return security and

confidentiality agreements prior to

receiving information about Federal

employees identified as subject to

FSOP. This rule would include this

material unchanged at § 273.18(p)(3)(ii).

Except for conforming references to

this proposed rule, no changes are

proposed for current rules requiring

security and confidentiality agreements

from State agencies as a condition for

receiving FSOP debt information

currently at 7 CFR 273.18(g)(6)(iii)(A).

(See § 273.18(p)(3)(iii).)

Review of Claim Status

Current rules at 7 CFR

273.18(g)(6)(ii)(D) require that prior to

taking any action to collect recipient

claims under FSOP, State agencies must

review records to verify the amount

owed, and to remove claims which have

been paid, which are being paid

according to an agreed to schedule, or

which for other reasons are not

collectible. This requirement remains

essentially unchanged in this proposed

rule. (See § 273.18(p)(3)(iv).)

Advance Notices

Current rules at 7 CFR 273.18(g)(6)(iii)

specify the requirements for State

agency advance notices to Federal

employees. This rule proposes to

modify those requirements based on the

requirements of DCIA and combine the

FSOP advance notice with 60-day notice

proposed in this rule, and to conform

references to the proposed rule.

Current rules at 7 CFR

273.18(g)(6)(iii)(B) prescribe procedures

for referring salary offset claims to FNS

following State agency efforts to collect

them through advance notices. This rule

proposes to place this material after the

requirements for the contents of the

notice. This rule proposes to reduce the

documentation required for FSOP

claims referred to FNS. The rule also

proposes to move the requirements for

referring defaulted claims and to specify

that such referrals must include the

same documentation as claims referred

to FNS because of no timely or adequate

response to the advance notice. (See

§ 273.18(p)(3)(vii).)

Current rules at 7 CFR

273.18(g)(6)(iii)(C) state the

requirements for the contents of the

advance notice. This rule proposes to

require that the notice advise debtors of

certain matters.

Current rules at 7 CFR

273.18(g)(6)(iii)(C)(1) require that the

advance notice state that according to

State agency records the debtor is liable

for a claim for a specified dollar amount

due to receiving excess food stamp

benefits. This rule proposes to require

that the notice advise debtors of what

State agency records indicate is their

name and SSN and that they are liable

for a specified unpaid balance of a

recipient claim resulting from

overissued food stamp benefits. (See

§ 273.18(p)(3)(v)(B)(1) and (2).)

Current rules at 7 CFR

273.18(g)(6)(iii)(C)(2) and the first

sentence of 7 CFR 273.18(g)(6)(iii)(C)(3)

discuss procedure and authorities

related to FSOP. This rule proposes to

modify this material and add the

citation of the authority for collection

through ADOP. (See

§ 273.18(p)(3)(v)(B)(7).)

Voluntary Payment

Current rules in the second sentence

of 7 CFR 273.18(g)(6)(iii)(C)(3) and in

the rest of that paragraph specify that

the advance notice must state that the

claim will be referred to FNS for

collection from the debtor’s Federal

salary unless it is paid in full within 30

days or in installments of $50 if the

claim was greater than $50. The

Department specified an installment

structure for FSOP claims with the

intent to relieve State agencies of the

need to negotiate with debtors.

Experience with FSOP indicates that the

installment structure did not help in

this regard. State agencies often

preferred to have the discretion to

negotiate a payment schedule with

debtors. Accordingly, this rule proposes

to provide this flexibility and to

incorporate a notice that the claim is

subject to administrative offset.

Accordingly, § 273.18(p)(3)(v)(B)(3)

would require that the advance notice

advise the debtor that unless the debtor

pays the claim within 30 days of the

date of the notice or makes other

repayment arrangements acceptable to

the State agency, the State agency

intends to refer the claim for collection

from his or her salary and/or by

administrative offset from other Federal

payments which may be payable to the

debtor.

Current rules at 7 CFR

273.18(g)(6)(iii)(C)(4) require that the

advance notice include the name,

address and a toll-free or collect

telephone number of a State agency

contact (an individual or unit) for

repayment and/or discussion of the

claim. As in the case of the FTROP 60-

day notice, this rule proposes to require

that the advance notice advise debtors

that to pay the claim voluntarily or to

discuss it, the debtor should contact the

State agency. The advance notice would

also be required to include the name of

the State agency contact for this purpose

(such as an office, administrative unit

and/or individual), the contact’s street

address or post office box, and a toll-free

or collect telephone number for that

contact.

Current rules at 7 CFR

273.18(g)(6)(iii)(C)(5) state the required
Federal Register / Vol. 63, No.102 /Thursday, May 28, 1998 / Proposed Rule 29325

contents for the advance notice with

respect to the debtors’ rights for review

of the intended collection action under

FSOP. The second sentence of that

paragraph requires that the advance

notice state that unless the State agency

receives documentation that the claim is

not collectible within 30 calendar days

the State agency will refer the claim to

FNS for collection from the debtor’s

salary. This rule proposes to replace that

sentence with the requirement that the

advance notice advise debtors that the

State agency must receive the

documentation within 30 days at the

address provided in the notice, that the

debtor should provide his or her SSN

and that the claim will not be referred

for collection from the debtor’s Federal

salary of other Federal payments

pending the State agency’s review of

that documentation. This rule also

proposes to add the requirement that the

advance notice advise debtors that a

claim is not collectible if a bankruptcy

filing prevents collection of the claim.

(See § 273.18(p)(3)(v)(B)(5).)

The Department believes that State

agencies should notify debtors of their

decision either to refer or not to refer the

claim for collection. Accordingly, this

rule proposes to require at

§ 273.18(p)(3)(vi) that State agencies

notify debtors in writing of decisions on

documentation submitted concerning

payments and other matters relating to

the collection of claims under FSOP and

ADOP.

FNS Action on Claims Referred by State

Agencies

Current rules at 7 CFR 273.18(g)(6)(v)

specify pertinent matters relating to FNS

actions on FSOP claims referred by

State agencies. This rule proposes no

change in that paragraph except to

conform the references in the

introductory sentence of 7 CFR

273.18(g)(6)(v) to the paragraphs in this

proposed rule and to specify that the

notice of intent would advise debtors

that their recipient claim is subject to

collection through administrative offset

as well as from their Federal salary, and

to cite the authority for that collection

action, the DCA, as amended, 31 U.S.C.

3701.

Administrative Offset Program (ADOP)

As discussed in several places earlier

in this preamble, this rule proposes that

claims submitted under FTROP and

FSOP, but not collected under those

programs, would be subject to collection

through ADOP from other Federal

payments otherwise due debtors. Due

process notices for ADOP would have

been provided through separate FTROP

and FSOP notices or through a

combined notice which would include

FTROP, FSOP, ADOP or any other

FCCM. State agencies would not need to

re-submit those claims for ADOP. State

agencies would need to keep their

balances updated to avoid overcollections. (See § 273.18(p)(4).)

Implementation

The PRWORA set the date of

enactment, August 22, 1996, as the

effective date for the provisions of the

law relating to recipient claims. In

response, the Department, on August 26,

1996, issued an implementation

memorandum stating that these

provisions are to be implemented no

later than September 22, 1996.

The Department proposes 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. This

should provide sufficient time to amend

food stamp handbooks, demand letters

and forms, make any necessary changes

in data processing systems and

administrative procedures, and train

affected State and local agency staff.

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, Employment,

Food stamps, Fraud, Government

employees, Grant programs—social

programs, Income taxes, Penalties,

Reporting and recordkeeping

requirements, Social security, Students,

Supplemental Security Income (SSI),

Wages.

Accordingly, 7 CFR Parts 272 and 273

are proposed to be amended as follows:

1. The authority citation for Parts 272

and 273 continues to read as follows:

Authority: 7 U.S.C. 2011–2032.

PART 272—REQUIREMENTS FOR

PARTICIPATING STATE AGENCIES

§ 272.2 [Amended]

2. In § 272.2:

a. Paragraph (a)(2) is amended by

removing the last sentence; and

b. Paragraph (d)(1)(xii) is removed.

§ 272.12 [Removed]

3. § 272.12 is removed.

PART 273—CERTIFICATION OF

ELIGIBLE HOUSEHOLDS

4. In § 273.2, paragraph (b)(4) is added

to read as follows:

§ 273.2 Application processing.

* * * * *

(b) Food stamp application form.

* * *

(4) Privacy Act statement. At the time

of application and at each recertification

through a written statement on or

provided with the application form, all

applicants for food stamp benefits shall

be notified 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 (7 U.S.C. 2011 et seq.) The

information will be used to determine

whether your household is eligible or

continually eligible to participate in the

Food Stamp Program and may be

subject to verification 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 assistance programs or

federally assisted State programs, to the

Comptroller General of the United

States for authorized audit and

examination purposes and to Federal,

State and local law enforcement officials

for the purpose of apprehending persons

fleeing to avoid prosecution, custody or

confinement or to a court, magistrate, or

administrative tribunal when required

in civil or criminal proceedings.

(iii) If a claim arises against your

household as a result of participation in

the Food Stamp Program, the

information you provide, including the

SSN of each member of your household,

may be referred to Federal and State

agencies, as well as private claims

collection agencies, for claims collection

action, including but not limited to

administrative offset, and to the

Department of Justice for litigation.

(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. § 273.18 is revised to read as

follows:

§ 273.18 Claims against households.

(a) Responsibility for recovering

overpayments—(1) Household and

individual liability. (i) All adult

household members shall be jointly and

severally liable for the value of any

overissuance of benefits to the

household. All adult household

members shall also be responsible for

the amount of any claim established for

the trafficking of benefits.
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(ii) Any sponsor of an alien and the

alien’s household shall be jointly and

severally liable for the value of any

benefits overissued as a result of

incorrect information being provided by

the sponsor. However, if the alien’s

sponsor had good cause or was without

fault, the alien’s household shall be

solely liable for repayment of the

overissuance.

(2) State agency responsibility. (i)

Unless specified under paragraph (g)(2)

of this section, the State agency shall

establish a claim against:

(A) Any participating household

(including former adult members) or

non-participating household that has

trafficked benefits or received more food

stamp benefits than it was entitled to

receive; and

(B) Any household which contains an

adult member who was an adult

member of another household that

trafficked benefits or received more food

stamp benefits than it was entitled to

receive.

(ii) Even though the establishment

and collection of food stamp recipient

claims are delegated to State agencies,

these debts shall remain Federal debts

subject only to this and other

regulations governing Federal debts.

(b) Intentional program violation

(IPV) claims. An IPV is defined in

§ 273.16(c). A claim shall be handled as

an IPV claim only if one of the following

occurs:

(1) A court of appropriate jurisdiction

has determined that a household

member has committed an IPV.

(2) A household member was

determined at an administrative

disqualification hearing to have

committed an IPV.

(3) A household member signs a

disqualification consent agreement for a

suspected IPV referred for prosecution.

(4) A household member signs a

waiver of his/her right to an

administrative disqualification hearing.

(c) Inadvertent household error (IHE)

claims. A claim shall be handled as an

IHE claim if the overissuance or

recipient misuse incident was caused by

a misunderstanding or unintended error

on the part of the household. In

addition, at the option of the State

agency, a potential IPV may be handled

as an IHE claim prior to the

determination of IPV.

(d) Agency error (AE) claims. (1) A

claim shall be handled as an AE claim

if the overissuance was caused by an

action or failure to take action by the

State agency.

(2) The State agency shall take action

to establish a claim against any

household that received an overissuance

due to a State agency error. No recipient

claim shall be established if an

overissuance occurred as a result of the

household transacting an expired

Authorization to Participate card (ATP),

unless the household altered its ATP.

(e) Calculating the claim amount—(1)

Non-trafficking claims. A claim that is

not related to trafficking shall be

calculated incorporating all of the

following:

(i) For each month that a household

received an overissuance, the State

agency shall determine the correct

amount of food stamp benefits, if any,

the household was entitled to receive.

(ii) The amount of correct benefits, if

any, and the resulting claim shall be, at

a minimum, calculated back to twelve

months prior to the date of discovery.

For an IPV claim, the resulting claim

shall be calculated back to the month

the act of IPV occurred. However, for

any claim, the State agency shall not

include in its calculation any amount of

the overissuance that occurred in a

month more than six years from the

discovery date. The discovery date is

defined in paragraph (g)(2) of this

section.

(iii) In calculating an IPV or IHE claim

involving unreported earned income,

the State agency shall not apply the

earned income deduction to that part of

any earned income which the

household failed to report in a timely

manner when this act was the basis for

the claim.

(iv) If the household received a larger

allotment than it was entitled to receive,

the State agency shall establish a claim

against the household as follows:

(A) The allotment that the household

should have received is subtracted from

the allotment the household actually

received.

(B) This amount is then reduced by

any EBT benefits expunged from the

household’s EBT benefit account (up to

the amount of the claim) that have not

previously been applied to any other

claim. The difference is the amount of

the claim.

(v) For categorically eligible

households, an IHE or AE claim shall

only be calculated and established when

it can be computed on the basis of a

change in net income and/or household

size.

(2) Trafficking-related claims. Claims

arising from trafficking-related offenses

shall be the value of the trafficked

benefits as determined by: the

individual’s admission; adjudication; or

the documentation which forms the

basis for the trafficking determination.

(f) Claim referral, establishment and

backlog prevention. (1) State agencies

shall establish a claim before the last

day of the quarter following the quarter

in which the overissuance was

discovered. For example, if the date of

discovery, as defined in paragraph (f)(2)

of this section, is in October, November,

or December, the last day to timely

establish the claim shall be March 31 of

the following calendar year.

(2) The ‘‘date of discovery,’’ for the

purposes of this section, shall be the

date the potential claim is initially

detected as a possible overissuance by

the State agency. The State agency shall

annotate the date of discovery for each

claim referral in the appropriate case/

claim file or claim tracking system.

(3) The ‘‘date of establishment,’’ for

the purposes of this section, shall be the

date that the initial claim notification or

demand letter, as described in

paragraph (g)(3) of this section, is sent

to the household. The State agency shall

annotate the date of establishment for

each claim referral in the appropriate

case/claim file or claim tracking system.

(4) State agencies shall ensure that no

less than 90 percent of all claim referrals

are either established or, if warranted,

disposed of within the time frame

established in paragraph (f)(1) of this

section.

(g) Initiating collection action and

managing claims—(1) Applicability.

State agencies shall initiate 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 pursue the

establishment of any claim and

subsequent collection of the

overissuance if the pursuit is

determined not to be cost effective by

using either of the following

methodologies:

(i) State-agency developed

methodology for cost-effectiveness

determination. A State agency may

adopt its own procedure, threshold,

and/or methodology for use in

determining whether to pursue the

establishment of any claim and

subsequent collection of the

overissuance. State agencies shall obtain

prior approval from FNS for use of this

procedure, threshold, and/or

methodology.

(ii) FNS threshold for establishing and

collecting overissuances. (A) Unless

prohibited by paragraph (g)(2)(ii)(C) of

this section, a State agency may utilize

the claims threshold as defined in

paragraph (g)(2)(ii)(B) of this section in

determining whether to pursue the

establishment of any claim and

collection of the subsequent

overissuance.

(B) The FNS threshold for establishing

a claim and pursuing collection from an
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overissuance is the maximum dollar

amount of a claim or claim referral that

a State agency may decide not to pursue

solely based on the amount of the

referral. The threshold is equal to $125.

(C) A State agency shall not apply this

threshold to overissuances which may

be collected by reducing the allotment

of the household. This threshold also

does not apply to overissuances which

have already been established as claims.

(3) Notification of Claim. (i) Each

State agency shall develop and mail or

otherwise deliver to the household

written notification to initiate collection

action on any claim. The written

notification or demand letter shall

contain the information required by

paragraphs (g)(3)(iii), (g)(3)(iv) and

(g)(3)(v) of this section. Subsequent

demand letters or notices may be sent at

periodic intervals at the discretion of

the State agency.

(ii) The claim shall be considered

established for tracking and reporting

purposes as of the date of the initial

written notification or demand letter.

(iii) If the claim or the amount of the

claim was not established at a hearing,

the State agency shall provide the

household with a one-time notice of

adverse action as part of or along with

the initial demand letter/notification of

claim. The notice of adverse action shall

contain a statement that informs the

household that it has 90 days to request

a fair hearing on the claim.

(iv) The demand letter or

accompanying notice of adverse action

shall inform the household of the

following:

(A) The type and amount of the claim,

the intent to collect the claim from all

adults in the household when the claim

occurred; the intent to collect the claim,

if not paid, by referral to other agencies,

including private collection agencies,

for the purposes of various claim

collection methods;

(B) The opportunity to inspect and

copy records related to the claim;

(C) Unless the amount of the claim

was established at a hearing, the

opportunity for a fair hearing on the

decision related to the claim;

(D) The opportunity to make a written

agreement to repay the amount of the

claim prior to the claim being referred

to Federal tax refund offset, Federal

salary offset, Federal administrative

offset or other Federal claims collection

actions; and

(E) That, if the claim becomes

delinquent, the household may be

subject to additional processing charges

and the claim may be referred to the

Department of Justice for litigation.

(v) The demand letter for any claim

shall contain a due date for the

submission of full repayment of the

claim unless the State agency

determines that allotment reduction will

be invoked to repay the claim of a

participating household. The due date

shall be not later than 30 days after the

date of the initial written notification or

demand letter.

(4) Due dates for repayment

agreements. (i) Any repayment

agreement for any claim shall contain

due dates for the periodic submission of

payments.

(ii) The agreement shall specify that

the household shall be subject to

involuntary collection action(s) if

payment is not received by the due date

and the claim becomes delinquent.

(5) Time frames and delinquency. (i)

Unless specified in either paragraph

(g)(6)(iv) or (g)(7)(i) of this section, any

claim shall be considered delinquent if

either of the following occurs:

(A) The claim has not been paid by

the due date and a satisfactory payment

arrangement has not been made.

(B) A satisfactory payment

arrangement has been made for the

claim and payment has not been

received by the due date specified in the

established repayment schedule.

(ii) The date of delinquency for a

claim covered under paragraph

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

on the initial written notification/

demand letter. The claim shall 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

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

of the missed installment payment. The

claim shall remain delinquent until

payment is received in full, allotment

reduction is invoked, or, at the State

agency’s option, a new repayment

schedule is negotiated.

(iv) A claim shall not be considered

delinquent if another claim for the same

household is currently being paid either

through an installment agreement or

allotment reduction and the State

agency expects to begin collection on

the claim once the prior claim(s) is

settled. A claim may also not be

considered delinquent if it is an IPV

where collection is coordinated through

the court system and the State agency

has limited control over collection

action.

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

a household timely requests a fair

hearing on the existence or amount of

the claim, all attempts by the State

agency to collect the claim shall cease.

A claim awaiting a fair hearing decision

shall not be considered delinquent.

(ii) If the hearing official determines

that a claim does, in fact, exist against

the household, the household shall be

sent another demand letter. The State

agency may combine the demand letter

with the notice of the hearing decision.

Delinquency, as determined in

paragraph (g)(6) of this section, shall be

based on the due date of this subsequent

demand letter and not on the initial prehearing 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 (g)(8) of this section.

(7) Compromising claims. (i) A State

agency 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 settled in three years.

(ii) The authority to compromise is

limited to claims under $20,000.

(iii) A State agency may use the full

amount of the claim (including any

amount compromised) to offset benefits

in accordance with § 273.17.

(iv) If the claim becomes delinquent,

any compromised portion of that claim

shall be reinstated to the claim balance.

(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 a claim

which is no longer considered a

receivable subject to continued Federal

and State agency collection and

reporting requirements. All claims that

are terminated shall be immediately

written-off. If additional collection

methodologies are developed in the

future, State agencies may reinstate

terminated claims.

(ii) State agencies shall terminate any

claim if the claim meets one of the

following criteria:

(A) The claim is found to be invalid

in a fair hearing, administrative

disqualification hearing or court

determination. Collection efforts shall

be pursued, however, if it is established

at the hearing or in court that an

overissuance did, in fact, occur. In

instances where the court or hearing

official determines that the act causing

the overissuance was not intentional,

the claim would continue to be pursued

as an IHE or AE claim.

(B) It is discovered that all adult

household members have died and the

State agency is not planning to pursue

collection from the estate.

(C) The claim has an outstanding

balance of $25 or less and has been

delinquent for 90 days or more.

(D) Any claim which the State agency

has determined is not cost effective to

pursue further collection activity. The
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State cost-effectiveness criteria is

subject to prior FNS approval.

(E) The claim has been delinquent for

three years or more. The State agency

may opt not to terminate the claim if

prior collections have been realized

through Federal or state tax refund

offset, salary offset or any other similar

collection mechanism.

(h) Acceptable forms of payment—(1)

Allotment reduction. State agencies may

collect claims as specified in paragraph

(i)(1) of this section by reducing a

household’s benefits prior to issuance.

(2) Cash and its equivalents. (i) A

State agency may accept payment for

claims in cash or in any of its generally

accepted equivalents. This includes

check and money order. In addition, a

State agency may accept payments with

credit and/or debit cards if the State

agency has the capability to accept such

payments. Collections made using

intercepts such as wage garnishment

and tax offset are considered ‘‘cash’’ for

FNS claim accounting and reporting

purposes.

(ii) When an unspecified joint

collection is received for a combined

public assistance/food stamp recipient

claim, each program shall receive its pro

rata share of the amount collected.

(3) Paper food coupons. Households

may pay claims using paper food

coupons. If coupon books collected from

households as payment for claims are

returned intact and in usable form, the

State agency may return them to coupon

inventory. The State agency shall

destroy any coupons or coupon books

which are not returned to inventory and

document as appropriate.

(4) Benefits from electronic benefit

transfer (EBT) accounts. (i) State

agencies shall allow a household to pay

its claim using benefits from its active

food stamp EBT benefit account.

(ii) Payments shall be accepted from

inactive or stale EBT benefit accounts

once the account is reactivated at the

request of the household.

(iii) The State agency shall secure and

retain documentation from the

household authorizing a collection from

an active or reactivated EBT benefit

account.

(iv) A collection using EBT benefits

shall be considered a non-cash

collection and corresponding funds

shall not be drawn from the Federal EBT

benefit account by the State agency

when this type of collection is made.

(v) In instances where the benefits are

expunged and the State agency was

unable to make the adjustment as

outlined in paragraph (e)(1)(iv)(B) of

this section when calculating the claim,

the State agency shall adjust the amount

of the claim by subtracting the amount

expunged from the claim balance. These

adjustments shall not be considered

collections and the retention amounts in

paragraph (m) of this section shall not

apply to these transactions.

(i) Collection methods—(1) Allotment

reduction. (i) Except as specified in

paragraph (i)(1)(iv) of this section and

upon notification as specified in

paragraph (g)(3) of this section, the State

agency shall automatically collect

payments for any claim by reducing the

amount of monthly benefits that a

household receives from any

participating household that contains an

individual liable for that claim.

Individuals in households which are

subject to allotment reduction shall not

be subject to involuntary collection by

any other means.

(ii) For IPV claims, unless the

household agrees to a higher amount,

the amount of benefits to be recovered

each month through allotment reduction

shall be the greater of 20 percent of the

household’s monthly allotment/

entitlement or $20 per month. The State

agency has the option to base this

amount on either the actual allotment or

entitlement as long as this calculation is

handled the same in all areas of the

State.

(iii) For IHE and AE claims, unless the

household agrees to a higher amount,

the amount of benefits to be recovered

each month through allotment reduction

shall be the greater of 10 percent of the

household’s monthly allotment or $10

per month.

(iv) At the time the household is

certified and receives an initial

allotment, the initial allotment shall not

be reduced to offset a claim.

(v) Collection via allotment reduction

does not preclude the State agency from

pursuing additional collections methods

against any individual severely liable

for payment of the claim who is not

currently a member of a participating

household.

(2) Offsets to restored benefits. State

agencies shall immediately offset any

restored benefits owed to the household

by the amount of any outstanding claim.

This is to be accomplished at any time

during the claim establishment and

collection process.

(3) Lump sum payments. State

agencies shall accept any payment for a

claim whether it represents full or

partial payment. State agencies may

accept payments in any of the

acceptable formats.

(4) Installment payments. (i) State

agencies may accept installment

payments made for a claim as part of a

negotiated repayment agreement.

(ii) Households failing to submit

payment in accordance with the terms

of the negotiated repayment schedule

are considered delinquent and shall be

subject to additional collection actions.

(5) Intercept of unemployment

compensation benefits. (i) A State

agency may, at its option, arrange for the

intercept of unemployment

compensation benefits for the collection

of any claim.

(ii) A State agency may also attempt

to recover claims from liable individuals

by obtaining a writ, order, summons, or

other similar process in the nature of

garnishment from a court of competent

jurisdiction to require the withholding

of amounts from unemployment

compensation.

(iii) Collections made by this method

shall be treated as ‘‘cash’’ payments as

described in paragraph (h)(2) of this

section. This collection option may be

included as part of a repayment

agreement.

(6) Other collection actions. State

agencies 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.

(7) Coordination with Federal claims

collection methods. State agencies may

continue collection efforts on claims as

specified in this paragraph (i) after

submitting such claims for collection as

specified in paragraph (p) of this

section.

(j) Overpaid claims. If a household

has overpaid a claim, the State agency

shall provide a refund for the overpaid

amount as soon as possible after the

overpayment becomes known. The

household shall be paid by whatever

method the State agency deems

appropriate considering the household’s

circumstances.

(k) Interstate claims collection. (1)

Unless a transfer occurs as outlined in

paragraphs (k)(3) and (k)(4) of this

section, a State agency remains

responsible for initiating and continuing

collection action on any food stamp

claim regardless of whether the

household remains in its jurisdiction.

(2) A State agency must respond

within 30 days to inquiries concerning

household participation received from

another State agency if the agency has

reason to believe that a household with

an outstanding claim has relocated to

that State.

(3) A State agency must accept the

responsibility for collecting the

remaining balance of any claim from

another State agency if it is discovered

that a relocated household with a claim
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is receiving food stamp benefits in the

receiving State agency’s jurisdiction.

(4) A State agency may, but is not

required to, accept the responsibility for

collecting the remaining balance of any

claim from another State agency if it is

discovered that the relocated household

is residing in but not receiving food

stamp benefits in the receiving State

agency’s jurisdiction.

(l) Claims discharged through

bankruptcy. State agencies shall act on

behalf of, and as, FNS in any

bankruptcy proceeding against bankrupt

households with outstanding recipient

claims. State agencies shall possess any

rights, priorities, interests, liens or

privileges, and shall participate in any

distribution of assets, to the same extent

as FNS. Acting as FNS, State agencies

shall have the power and authority to

file objections to discharge, proofs of

claims, exceptions to discharge,

petitions for revocation of discharge,

and any other documents, motions or

objections which are appropriate under

the circumstances. Any amounts

collected under this authority shall be

transmitted to FNS as provided in

paragraph (n) of this section.

(m) Retention rates. (1) The State

agency shall retain 20 percent of the

value of IHE claims collected and 35

percent of the value of IPV claims

collected. In addition, the State agency

shall retain a total of 35 percent of the

value of IHE claims collected via

unemployment compensation benefit

withholdings. These retention rates

shall apply for claims and delinquent

claims collection charges collected by

the State agency, including the value of

allotment reductions for the purpose of

collecting claims but not reductions in

benefits due to disqualification.

(2) The State agency shall not retain

any percentage of the value of AE claims

collected.

(n) Submission of payments to FNS.

The State agency shall submit the value

of funds collected for IHE, IPV or AE

claims in accordance with instructions

issued by FNS. Any payment to State

agencies for claims collection retention

must be made by electronic funds

transfer.

(o) Accounting procedures. Each State

agency shall be responsible for

maintaining 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. At a minimum, the accounting

system shall readily accomplish the

following:

(1) Document the date of discovery,

the circumstances which resulted in a

claim, the procedures used to calculate

the claim, the date of establishment, the

methods used to collect the claim,

delinquent claim collection charges, and

the circumstances which resulted in the

final disposition of the claim.

(2) Identify those situations in which

an amount not yet restored to a

household can be used to offset a claim

owed by the household.

(3) Identify those households whose

claims have become delinquent either

by not responding to the demand letter

or failing to make an installment

payment on their claim.

(4) Document how much money was

collected in payment of a claim and

periodically advise households of the

status of their claim balances.

(5) Identify at certification households

with outstanding claims.

(6) Produce and accurately support

balances in collections and outstanding

liabilities for the recipient claims

established.

(7) At an interval determined by FNS,

produce summary reports of the funds

collected, the amount submitted to FNS,

the claims established and terminated,

the delinquent claims collection

charges, the uncollected balance and the

delinquency of the unpaid debt.

(8) On a quarterly basis, unless

otherwise directed by FNS, reconcile

summary balances reported to

individual supporting records.

(p) Federal claim collection methods

(FCCM’s)—(1) General. Federal claim

collection methods (FCCM’s) include

the Federal Income Tax Refund Offset

Program (FTROP), the Federal Salary

Offset Program (FSOP) and the

Administrative Offset Program (ADOP)

specified in this paragraph (p). Under

procedures for FCCM’s, State agencies

are responsible for the recipient claim

actions required in § 273.18, including

the due process and related actions

specified in this paragraph (p). For

claims offset under FCCM’s, State

agencies receive the percentage of such

collections specified in paragraph (m) of

this section.

(i) Claims subject to FCCM’s. (A) All

claims shall be subject to collection by

FCCM’s only after the State agency has

initiated one or more collection

methods specified in paragraph (i) of

this section. The requirement for a prior

collection effort shall not apply when,

as indicated by such evidence as

demand letters returned as

undeliverable, no liable individual can

be located.

(B) State agencies shall submit all

claims subject to collection by FCCM’s

as required in paragraph (p) of this

section.

(ii) Procedures and schedules. State

agencies shall submit data on claims

subject to FCCM’s in record formats,

according to schedules, and by

transmission methods as specified by

FNS, and follow other technical and

procedural guidelines as specified by

FNS in the Manual for Federal Claims

Collection Methods for the FSP (the

FCCM manual).

(iii) Identification of types of claim.

For each claim submitted under

FCCM’s, State agencies shall identify

whether the claim is due to an

inadvertent household error, intentional

Program violation or a State agency

administrative error. For any claim

which is submitted for collection under

FCCM’s and which is a combination of

more than one type of claim, State

agencies shall specify the dollar

amounts due to each type of claim.

(iv) Updating claim records. As

instructed in the FCCM manual, State

agencies shall update records of claims

submitted under FCCM’s by reducing

the amounts of and deleting claims to

reflect payments received, and by

deleting claims which for other reasons

are no longer subject to collection under

FCCM’s.

(v) Hierarchy of collection methods.

Claims submitted under paragraph (p) of

this section will be offset from Federal

payments due to debtors as such

payments are identified and are

available for offset.

(2) Federal Tax Refund Offset

Program (FTROP)—(i) Criteria for

claims subject to FTROP. State agencies

shall submit for collection from Federal

income tax refunds all recipient claims

which are delinquent as specified in

paragraph (p)(1)(i) of this section and

which are legally enforceable. Such

claims must:

(A) Be claims with a dollar value

which is at least the minimum dollar

amount established by the Department

of Treasury. (B) Be claims for which the

date of the initial demand letter is

within 10 years of January 31 of the

offset year, except that claims reduced

to final court judgments ordering

individuals to pay the debt are not

subject to this 10-year limitation.

(C) Not include any claim submitted

for collection from an individual in a

household which, as specified in

paragraph (i)(1) of this section, is subject

to allotment reduction

(D) Not include any claim for which

collection is barred by a bankruptcy.

(E) Be claims for which individuals

have been provided all of the

opportunities for review and the

notifications specified in paragraphs
29330 Federal Register / Vol. 63, No.102 /Thursday, May 28, 1998 / Proposed Rule

(p)(2)(iii), (p)(2)(iv), and (p)(2)(v) of this

section.

(ii) Combined claims. If a claim which

is otherwise subject to collection under

FTROP is a combination of two or more

recipient claims, the date of the initial

demand letter for each claim combined

shall be within the 10-year range

specified in paragraph (p)(2)(i)(B) of this

section. Claims reduced to judgment

shall not be combined with claims

which are not reduced to judgment.

(iii) 60-Day notice to individuals. (A)

Prior to referring claims for collection

under FTROP, the State agency shall

provide individuals from whom it seeks

to collect such claims with a notice,

called a 60-day notice.

(B) The 60-day notice shall advise the

debtor:

(1) What, according to State agency

records, is the debtor’s name and Social

Security Number (SSN).

(2) That the debtor is liable for a

specified unpaid balance of a recipient

claim resulting from overissued food

stamp benefits.

(3) That unless the debtor pays the

claim within 60 days of the date of the

notice or makes other repayment

arrangements acceptable to the State

agency, the State agency intends to refer

the claim for deduction from the

debtor’s Federal income tax refund and/

or collection by administrative offset

from other Federal payments which may

be payable to the debtor.

(4) That to pay the claim voluntarily

or to discuss it, the debtor should

contact the State agency. The 60-day

notice shall include the name of the

State agency contact for this purpose

(such as an office, administrative unit

and/or individual), the contact’s street

address or post office box, and a toll-free

or collect telephone number for the

State agency contact.

(5) That if the debtor’s claim is

referred for Federal collection, a charge

for the administrative cost of collection

will be added to the claim and that

amount will also be deducted if the

claim, or any portion of it, is deducted

from the debtor’s tax refund or other

Federal payment.

(6) That the debtor is entitled to

request a review of the intended

collection action and that the State

agency must receive such a request

within 60 days of the date of the 60-day

notice. Such a request must be written,

must be submitted to the address

provided in this notice and should

contain the debtor’s SSN. The claim will

not be referred for offset from the

debtor’s tax refund or for collection

from other Federal payments while the

State agency’s review is pending.

(7) That the Debt Collection Act of

1982, as amended (31 U.S.C. 3701),

authorizes collection of claims by

administrative offset after giving the

debtor notice of that intended action

and advising the debtor of the debtor’s

rights under that statute. This notice

meets the requirements for providing

such notice and advice.

(8) That the claim is not legally

enforceable if a bankruptcy prevents

collection of the claim.

(9) That the debtor may want to

contact the debtor’s local office of the

Internal Revenue Service if the debtor is

filing a joint Federal income tax return.

(C) In the certification letter required

in paragraph (p)(2)(vi)(B)(4) of this

section, the State agency shall include a

statement that its 60-day notice

complies with the requirements of

paragraph (p)(2)(iii)(B) of this section.

(D) The State agency shall mail 60-day

notices for claims to be referred for

collection through FTROP and

administrative offset according to the

schedule provided by FNS.

(E) The State agency shall mail 60-day

notices using the address information

provided by Treasury unless the State

agency receives clear and concise

notification from the taxpayer that

notices from the State agency are to be

sent to an address different from the

address obtained from Treasury. Such

clear and concise notification shall

mean that the taxpayer has provided the

State agency with written notification

including the taxpayer’s name and

identifying number (which is generally

the taxpayer’s SSN), the taxpayer’s new

address, and the taxpayer’s intent to

have notices from the State agency sent

to the new address. Claims for which

60-day notices addressed as required in

this paragraph (p)(2)(iii)(E) and are

returned as undeliverable may be

referred for collection.

(iv) State agency action on requests

for review. (A) For all written requests

for review received within 60 days of

the date of the 60-day notice, the State

agency shall determine whether or not

the subject claims are past due and

legally enforceable, and shall notify

individuals in writing of the result of

such determinations.

(B) The State agency shall determine

whether or not claims are past due and

legally enforceable based on a review of

its records, and of documentation,

evidence or other information the

individual may submit.

(C) If the State agency decides that a

claim for which a review request is

received is past due and legally

enforceable, it shall notify the

individual that:

(1) The claim was determined past

due and legally enforceable, and the

reason for that determination.

Acceptable reasons for such a

determination include the individual’s

failure to provide adequate

documentation that the claim is not past

due or legally enforceable.

(2) The State agency intends to refer

the claim for collection from the

debtor’s Federal income tax refund and/

or collection from other payments

which may be payable to the debtor by

the Federal Government.

(3) The individual may ask FNS to

review the State agency decision. FNS

must receive the request for review

within 30 days of the date of the State

agency decision. FNS will provide the

individual a written response to such a

request stating its decision and the

reasons for its decision. Pending the

FNS decision, the claim will not be

referred for collection from the debtor’s

Federal income tax refund and/or from

other payments which may be payable

to the debtor by the Federal

Government.

(4) A request for an FNS review must

include the individual’s SSN and must

be sent to the appropriate FNS regional

office. The State agency decision shall

provide the address of that regional

office, including in that address the

phrase ‘‘Offset Review.’’

(D) If the State agency determines that

the claim is not past due or legally

enforceable, in addition to notifying the

individual that the claim will not be

referred for offset, the State agency shall

take any actions required by food stamp

regulations with respect to establishing

the claim, including holding

appropriate hearings and initiating

collection action.

(E) The State agency shall not refer for

offset a claim for which a timely State

agency review request is received unless

the State agency determines the claim

past due and legally enforceable, and

notifies the individual of that decision

as specified in paragraphs

(p)(2)(iv)(C)(1), (p)(2)(iv)(C)(2) and

(p)(2)(iv)(C)(3) of this section.

(v) FNS action on appeals of State

agency reviews. (A) FNS shall act on all

timely requests for FNS reviews of State

agency review decisions as specified in

paragraph (p)(2)(iv)(C) of this section. A

request for FNS review is timely if it is

received by FNS within 30 days of the

date of the State agency’s review

decision.

(B) If a timely request for FNS review

is received, FNS shall:

(1) Complete a review and notification

as specified in paragraphs (p)(2)(v)(C)

and (p)(2)(v)(D) of this section,

including providing State agencies and
Federal Register / Vol. 63, No.102 /Thursday, May 28, 1998 / Proposed Rule 29331

individuals the required notification of

its decision; or

(2) Notify the State agency that it has

not completed its review and that the

State agency must delete the claims in

question from files to be certified to FNS

according to paragraph (p)(2)(vi) of this

section. If FNS fails to timely notify the

State agency and because of that failure

a claim is offset which FNS later finds

does not meet the criteria specified in

paragraph (p)(2)(i) of this section, FNS

will provide funds to the State agency

for refunding the charge for the offset

fee.

(C) When FNS receives an

individual’s request to review a State

agency decision, FNS shall:

(1) Request pertinent documentation

from the State agency about the claim.

Such documentation shall include such

things as printouts of electronic records

and/or copies of claim demand letters,

results of fair hearings, advance notices

of disqualification hearings, the results

of such hearings, records of payments,

60-day notices, review requests and

documentation, decision letters, and

pertinent records of such things as

telephone conversations; and

(2) Decide whether the State agency

correctly determined the claim in

question is past due and legally

enforceable.

(D) If FNS finds that the State agency

correctly determined that the claim is

past due and legally enforceable, FNS

will notify the State agency and

individual of its decision, and the

reason(s) for that decision, including

notice to the individual that any further

appeal must be made through the

courts.

(E) If FNS finds that the State agency

incorrectly determined that the claim is

past due and legally enforceable, FNS

will notify the State agency and

individual of its decision, and the

reason(s) for that decision. FNS will also

notify the State agency about any

corrective action the State agency must

take with respect to the claim and

related procedures.

(vi) Referral of claims for offset. (A)

State agencies shall submit to FNS a

certified file of claims for collection

through FTROP and administrative

offset by the date specified by FNS in

schedules which FNS will provide as

stated in paragraph (p)(2)(ii) of this

section.

(B) At the same time they submit the

certified file required in paragraph

(p)(2)(vi)(A) of this section, according to

instructions which FNS will provide as

stated in paragraph (p)(2)(ii) of this

section, State agencies shall submit a

letter which specifically certifies that:

(1) All claims contained in the

certified file meet the criteria for claims

referable for FTROP as specified in

paragraph (p)(2)(i) of this section.

(2) For all claims on the certified file

individuals have been provided all the

opportunities for review and the

notifications required in paragraphs

(p)(2)(iii), (p)(2)(iv), and (p)(2)(v) of this

section.

(3) The State agency has not included

in the certified file of claims any claim

which, as provided in paragraph

(p)(2)(v) of this section, FNS notified the

State agency is not past due or is not

legally enforceable, any claim for which

FNS notified the State agency that it has

not completed a timely requested

review, or any claim for which the State

agency has not completed a timely

requested review.

(4) The State agency’s 60-day notice

complies with the requirements of

paragraph (p)(2)(iii)(B) of this section.

(5) How the State agency determined

that the State agency contact

information required in paragraph

(p)(2)(vi)(C) of this section is accurate.

(C) The State agency shall provide to

FNS according to FNS instructions, the

name, address and toll-free or collect

telephone numbers of State agency

contacts to be included in IRS notices of

offset, and shall provide FNS updates of

that information if and when that

information changes.

(vii) Reporting FTROP and

administrative offset activities. As

specified in the FCCM manual, State

agencies shall:

(A) No later than the ten days after

mailing 60-day notices, report the

number of 60-day notices mailed and

the total dollar value of the claims

associated with those notices.

(B) Submit data security and

voluntary payment reports.

(3) Federal salary offset program

(FSOP)—(i) Identification of recipient

claims owed by Federal employees. FNS

will match all recipient claims

submitted by State agencies under

paragraph (p)(2) of this section against

Federal employment records maintained

by the Department of Defense and the

United States Postal Service. FNS will

identify recipient claims matched

during this procedure with the list of

recipient claims to be referred to the

Department of Treasury for collection

under paragraph (p)(2) of this section.

(ii) Security and confidentiality

agreements. When FNS receives a list of

Federal employees matched against

recipient claims for a particular State

agency, it will notify the State agency in

writing accompanied by a data security

and confidentiality agreement

containing the requirements specified in

paragraph (p)(3)(iii) of this section for

the State agency to sign and return.

When that agreement is returned, signed

by an appropriate official of the State

agency, FNS will provide the list of

matched Federal employees to the State

agency.

(iii) Security and confidentiality of

information. State agencies which

receive lists of Federal employees who

have been identified as owing recipient

claims shall take the actions specified in

this paragraph (p)(3)(iii) to ensure the

security and confidentiality of

information about those employees and

their apparent debts. In addition, those

State agencies shall ensure that any

contractors or other non-State agency

entities to which the records may be

disclosed also take these actions:

(A) By such means as card keys,

identification badges and security

personnel, limit access to computer

facilities handling the data to persons

who need to perform official duties

related to the salary offset procedures.

By means of a security package, limit

access to the computer system itself to

such persons;

(B) During off-duty hours, keep

magnetic tapes and other hard copy

records of data in locked cabinets in

locked rooms. During on-duty hours,

maintain those records under conditions

that restrict access to persons who need

them in connection with official duties

related to salary offset procedures;

(C) Use the data solely for salary offset

purposes as specified in this paragraph

(p)(3), including not extracting,

duplicating or disseminating the data

except for salary offset purposes;

(D) Retain the data only as long as

needed for FSOP purposes as specified

in this paragraph (p)(3), or as otherwise

required by FNS;

(E) Destroy the data by shredding,

burning or electronic erasure; and

(F) Advise all personnel having access

to the data about the confidential nature

of the data and their responsibility to

abide by the security and confidentiality

provisions stated in this paragraph

(p)(3)(iii).

(iv) Record review. State agencies

shall review the claims records of

matched Federal employees identified

as owing recipient claims to determine

the correct amount owed, and to remove

from the list of claims any recipient

claims which have been paid, which are

being paid as specified in paragraph

(i)(4) of this section, or which for other

reasons are not collectible.

(v) State agency advance notice of

salary offset. (A) Following the review

specified in paragraph (p)(3)(iv) of this

section, State agencies shall provide

each Federal employee verified as
29332 Federal Register / Vol. 63, No.102 /Thursday, May 28, 1998 / Proposed Rule

owing a recipient claim (debtor) with an

advance notice of salary offset (advance

notice). This advance notice shall be

mailed to the debtor at the address

provided by FNS, or shall be otherwise

provided, within 60 days of State

agency receipt of files of salary offset

claims. This notice may be combined

with the notice referred to under

paragraph (p)(2) of this section.

(B) The advance notice shall advise

debtors that:

(1) State agency records indicate that

the debtor’s Social Security Number

(SSN) is [the number]. The advance

notice shall also advise the debtor what

the debtor’s name is according to State

agency records.

(2) The debtor is liable for a specified

unpaid balance of a recipient claim

resulting from overissued food stamp

benefits.

(3) Unless the debtor pays the claim

within 30 days of the date of the notice

or makes other repayment arrangements

acceptable to the State agency, the State

agency intends to refer the claim for

collection from the debtor’s Federal

salary and/or by administrative offset

from other Federal payments which may

be payable to the debtor.

(4) To pay the claim voluntarily or to

discuss it, the debtor should contact the

State agency. The advance notice shall

include the name of the State agency

contact for this purpose (such as an

office, administrative unit and/or

individual), the contact’s street address

or post office box, and a toll-free or

collect telephone number for that

contact.

(5) Debtors may submit

documentation to State agencies

showing such things as payments of

claims or other circumstances which

would prevent collection of claims. A

claim is not collectible if a bankruptcy

filing prevents collection of the claim.

The State agency must receive the

documentation within 30 days at the

address provided in the notice. The

debtor should provide his or her SSN

with the documentation. The claim will

not be referred for collection pending

the State agency’s review.

(6) The debtor was found to be

employed by a Federal agency through

a computer match. That match was

conducted under the authority of and

according to procedures required by the

Privacy Act of 1974, as amended (5

U.S.C. 552a)

(7) Collection from the wages of

Federal employees, including United

States Postal Service employees, for

debts such as claims for overissued food

stamp benefits is authorized by the Debt

Collection Act of 1982, as amended (31

U.S.C. 3701). That statute also

authorizes collection of such debts by

administrative offset from other Federal

payments which may be payable to the

debtor.

(vi) State agency notice of review

decisions. The State agency shall notify

debtors in writing of the State agency’s

decision on documentation submitted

concerning payments and on other

matters relating to the collection of

claims under FSOP and administrative

offset.

(vii) Referral of claims to FNS. (A)

Within 90 days of the date of the

advance notice, the State agency shall

refer to FNS all claims for which the

State agency does not receive timely and

adequate response as specified in the

advance notice. Such referrals shall

consist of:

(1) For each claim, a copy of the

advance notice, a copy of the initial

demand letter, a record of payments

received and the current balance of the

claim; or

(2) If not previously provided to FNS,

one copy each of the State agency’s

language for advance notices and

demand letters, and for each claim the

dates of the advance notice and the

original demand letter, the amount of

the claim cited in each of those two

notices, the type of claim, a record of

payments received and the current

balance of the claim.

(B) If a debtor fails to make an

installment payment within 60 days of

the date the payment was due, State

agencies shall refer the claim to FNS,

reporting the default, and including the

documentation specified in paragraph

(p)(3)(v)(A) of this section.

(viii) FNS actions on claims referred

by State agencies. Departmental

procedures at 7 CFR 3.51–3.68 shall

apply to claims referred by State

agencies to FNS as required by

paragraph (p)(3)(v) of this section

subject to the following modifications:

(A) In addition to the definitions set

forth at 7 CFR 3.52, the term ‘‘debts’’

shall further be defined to include

recipient claims established according

to this section; and the terms ‘‘State

agency’’ and ‘‘FNS’’ shall be defined as

set forth in § 271.2 of this chapter.

(B) In addition to providing the right

to inspect and copy Departmental

records as specified at 7 CFR 3.60(a), the

Secretary shall provide copies of records

relating to the debt in response to timely

requests. For a request to be timely, FNS

must receive it within 30 calendar days

of the date of the notice of intent.

(C) Pursuant to 5 CFR 550.1104(d)(6),

an opportunity to establish a written

repayment agreement provided at 7 CFR

3.61 shall not be provided.

(D) The notice of intent for FSP salary

offset shall comply with the

requirements of the Departmental notice

of intent which are set forth at 7 CFR

3.55, subject to the following

modifications:

(1) In addition to the statement that

the debtor has the right to inspect and

copy Departmental records relating to

the debt, the notice of intent shall state

that if timely requested by the debtor,

the Secretary shall provide the debtor

copies of such records. It shall further

advise, as required by 7 CFR 3.60(a),

that to be timely such requests must be

received within 30 days of the date of

the notice of intent.

(2) The statement of the right to enter

a written repayment agreement

provided by 7 CFR 3.55(f) shall not be

included.

(3) The notice of intent shall advise

the debtor that, in addition to being

subject to collection from the debtor’s

Federal salary, the recipient claim is

subject to collection from other

payments due to the debtor from the

Federal Government. The notice shall

state that such collection is authorized

under the Debt Collection Act of 1982,

as amended (31 U.S.C. 3701).

(4) Administrative Offset Program

(ADOP). Claims submitted under

FTROP and FSOP are also subject to

collection through the Administrative

Offset Program (ADOP) from other

Federal payments otherwise due to

debtors.

Dated: May 15, 1998.

Shirley R. Watkins,

Under Secretary, Food, Nutrition, and

Consumer Services.

[FR Doc. 98–13848 Filed 5–27–98; 8:45 am]

BILLING CODE 3410–30–P