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Empire Justice Comments on USDA's Proposed SNAP Regulations Updating the Definition of Trafficking

August 18, 2011

 

Ronald Ward
Acting Chief, Retailer Management and Issuance Branch
Benefit Redemption Division at the Food and Nutrition Service
USDA
3101 Park Center Drive
Alexandria, Virginia 22302

RE: RIN 0584-AD97
      Comments on proposed amendments to 7 CFR Parts 271, 273, and 281
      Updated Trafficking Definition and SNAP-FDPIR Dual Participation

Dear Mr. Ward:

I am writing on behalf of the Empire Justice Center, a statewide, multi-issue, multi-strategy public interest law firm focused on changing the “systems” within which poor and low income New York State families live.

We appreciate the opportunity to comment on the above-referenced proposed regulations which implement two mandatory provisions of the 2008 Farm Bill. The proposed rules change the definition of trafficking for SNAP (Supplemental Nutrition Assistance Program) purposes and also clarify disqualification procedures for recipients of FDPIR (Food Distribution Program on Indian Reservations).

In accordance with the 2008 Farm Bill requirement, USDA proposes to expand the definition of trafficking in 7 CFR sec 273.1 to include:

  • the purchase with SNAP benefits of products that have container deposits for purposes of subsequently discarding the product and returning the container(s) in exchange for cash refund deposits;
  • the re-sale of products purchased with SNAP benefits for purposes of obtaining cash or consideration other than eligible food;
  • the purchase of products originally purchased with SNAP benefits and re-sold in exchange for cash or consideration other than eligible food.


Additionally, the trafficking definition has been substantially overhauled to delete obsolete references to coupons and to prohibit theft of client benefits.

Empire Justice recognizes the importance of maintaining program integrity in SNAP and FDPIR and generally supports the proposed regulations as written.  We are especially grateful that USDA has expanded the trafficking definition to address instances of client benefit theft, which causes significant hardship to affected households.

However, there are three specific areas where additional clarification from FNS is critically needed:

  1. strengthening protections where theft of client benefits has occurred, so that households can obtain replacement benefits when there is clear evidence of theft.
  2. ensuring inappropriate disqualifications do not occur against SNAP household members when someone other than a household member or authorized representative has redeemed SNAP benefits with the permission of the SNAP household.
  3. clearly enunciating the legal standard that must be met in order for a state to meet its burden of proof at an Administration Disqualification Hearing (ADH) in instances involving false or misleading statements – namely, the evidence must demonstrate that the individual not only intentionally made a false or misleading statement, but also made the false or misleading statement for the purpose of affecting eligibility for SNAP benefits.


More details are provided below.  Some of these recommendations may fall outside the scope of the proposed regulations.  However, they all involve some aspect of trafficking or allegations of trafficking as defined by the proposed regulations.  We would be grateful if USDA could tackle these issues through policy guidance or additional rule making if they cannot be addressed in the final regulations. 

  1. Authorize replacement allotments when EBT benefits have been stolen


As USDA acknowledged in its preamble, while elimination of paper coupons has largely reduced SNAP fraud, the Electronic Benefits Transfer (EBT) system has introduced new opportunities to steal benefits from households. 

If a retailer, store employee or other individual somehow gains access to a SNAP household’s account number and PIN, the “offender” can easily drain the EBT account of the unwitting household.  After they discover the theft, the household can obtain a replacement card to prevent future instances of fraud, but they cannot get the stolen benefits replaced – even if it is crystal clear that the benefits were stolen.  Sometimes there are systems issues or protocol breaches at the state or local level that result in the continuation of the benefit theft even after a replacement EBT card was issued. 

New York State has been struggling with these problems for quite some time.  Our office wrote about the stolen benefits issue in 2007. [1]  Legal services offices in New York City have had to resort to litigation in order to get restored benefits for clients who were victims of repeated benefit theft, when the state and local agency did not act in a timely manner to prevent the ongoing benefit theft. [2]   In another case where the perpetrator was eventually arrested and convicted, the New York State Welfare Inspector General described in a sentencing memorandum how one individual was able to steal benefits from “hundreds of poor and disadvantaged families” who were then unable to get their benefits replaced; the Inspector General recommended that “these victims be made whole.” [3] 

Households have been unable to get their stolen benefits replaced through SNAP because the replacement provision regulations at 7 CFR 274.6 do not provide any authorization to replace stolen EBT benefits.  The regulations provide for the replacement of stolen coupons, which no longer exist. 

It is absolutely critical that USDA update these replacement revision regulations as soon as possible to authorize the replacement of stolen benefits.  At a minimum, any revised regulations should allow for the replacement of benefits when a household makes a formal report of stolen benefits to the food stamp office and to the local law enforcement agency  AND when a review of EBT transactions show that the household’s benefits were redeemed through keyed, rather than swiped, transactions. [4] 

2.  Prohibit disqualifications based solely on card or PIN use by non-household member

   
We recently discovered that local food stamp offices in New York State are disqualifying SNAP recipients who allow non-household members to access their EBT account, if the non-household member has not been designated as an authorized representative.   These disqualifications have been upheld at the fair hearing level.

While giving your card and PIN to someone else may warrant an IPV disqualification in circumstances where there is clear and convincing evidence of fraudulent intent, at least two hearing decisions have held that the mere act of allowing someone else to use your card without appointing them as authorized representative is considered a fraudulent  offense. [5]  

We are gravely concerned about the broad implications of such a policy, which could result in innocent SNAP recipients being disqualified simply because they rely on others to shop for them.  For many disabled individuals, appointing an authorized representative is impractical or impossible if they rely on more than one person to shop for them.

We do not believe the statute or regulations authorize the disqualification of SNAP members in these instances.  We request that USDA explicitly state that allowing a non-household member access to the EBT card and PIN should not be treated as a trafficking offense, unless there is other clear and convincing evidence of fraudulent activity in connection with the card and PIN use – i.e., evidence that the household member sold or bartered the EBT benefits.


3.  Clarify IPV legal standard – false or misleading statements in themselves should not serve as the basis for disqualification unless they were made for the purpose of affecting SNAP eligibility


Another systemic problem faced by low income SNAP households in New York State involves the improper disqualification of SNAP members who have provided incorrect or misleading information on their SNAP application or recertification form, or who have failed to timely report a change, but who lack fraudulent intent.

The Human Resources Administration (HRA) in New York City had been disqualifying individuals who failed to disclose that they were married, even if these individuals did not live with their spouse and the marital status in itself did not affect financial eligibility for SNAP benefits.   In response to this practice, the Urban Justice Center filed a class action lawsuit entitled Robles v. Doar in federal district court to stop the improper terminations.  As a result of the lawsuit, the New York State Office of Temporary and Disability Assistance issued a general information message (GIS) last year clarifying that false or misleading marital status information could not serve as the basis for an IPV unless there was also evidence that the false or misleading marital status was provided for the purpose of affecting SNAP eligibility. [6]   

Unfortunately, OTDA’s memo specifically states that this legal standard applies ONLY to marital status.  Local districts continue to disqualify SNAP recipients who have provided incorrect or misleading information in other contexts, or who fail to timely report a required change, even when there is no evidence of fraudulent intent and the incorrect, misleading or missing information has very little, if any, effect on SNAP eligibility.  

For example, some districts are quite aggressive about disqualifying simplified reporters who fail to timely report moves to another county and who continue to access their SNAP benefits in their new county of residence until the expiration of their certification period.  In many instances, these households are eligible for exactly or almost exactly the same amount of benefits in their new county of residence, they do not apply for duplicate benefits in their new county, and they may erroneously believe they are subject to simplified reporting rules, rather than change reporting rules.  It seems completely inappropriate and punitive to impose an IPV sanction in this instance, where there is no evidence of fraudulent intent. 

We ask that the USDA clarify the legal standard for Intentional Program Violations, so that states are disqualifying only those individuals who have made false or misleading statements, or who have failed to report required information, for the purpose of affecting SNAP eligibility.

Thank you again for the opportunity to comment on these proposed regulations, and for your careful consideration of these comments. 


End Notes:
[1] See our article “Stop Thief!  The Bizarre Evaporating Food Stamp Phenomenon, ”published in the August 2007 edition of the Legal Services Journal, available online at http://onlineresources.wnylc.net/EJC/LSJ/aug2007.pdf
[2]See settlement in Boyd v. Doar (summary available at http://onlineresources.wnylc.net/show.asp?index=CaseID:676&indx=search&sShow=1&SID=676&seldb=2&method=)
[3] See March 26, 2010 sentencing memorandum in  Re: People v. Kenley Stanislas, Ind. No. 12362/08, available at  http://www.owig.state.ny.us/owig/docs/sentencing_stanislas.pdf
[4] A “swiped” transaction means that the EBT benefit card was swiped at the point of sale.  A “keyed” transaction means that the household’s account information was manually entered by the cashier at the point of sale.  Keyed transactions are more susceptible to fraud because they can occur without the physical presence of the person’s card.
[5] See Fair Hearing Decision # 5704070Q, available at http://www.otda.ny.gov/fair%20hearing%20images/2011-7/Redacted_5704070Q.pdf, and Fair Hearing Decision #5756879Y, available at http://www.otda.ny.gov/fair%20hearing%20images/2011-7/Redacted_5756879Y.pdf.  Both decisions were issued on July 14, 2011.
[6] See GIS 10 DC 004 “False or Misleading Marital Status and Food Stamp Program Intentional Program Violations, issued on February 5, 2010, available at http://otda.ny.gov/policy/gis/2010/10dc004.pdf