Supplemental Nutrition Assistance Program: Trafficking Controls and Fraud Investigations; Extension of Comment Period, 65515-65523 [2013-26265]

Agencies

• DEPARTMENT OF AGRICULTURE
• Food and Nutrition Service

[Federal Register Volume 78, Number 212 (Friday, November 1, 2013)]
[Rules and Regulations]
[Pages 65515-65523]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-26265]



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Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / 
Rules and Regulations

[[Page 65515]]



DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 271 and 274

[FNS-2012-0028]
RIN 0584-AE26


Supplemental Nutrition Assistance Program: Trafficking Controls 
and Fraud Investigations; Extension of Comment Period

AGENCY: Food and Nutrition Service (FNS), USDA.

ACTION: Final rule, Interim Final Rule; Extension of Comment Period.

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

SUMMARY: The Food and Nutrition Service (FNS) issued a final rule to 
amend Supplemental Nutrition Assistance Program (SNAP or Program) 
regulations to allow State agencies to deny a request for a replacement 
card until contact is made by the household with the State agency, if 
the requests for replacement cards are determined to be excessive. 
State agencies which elect to exercise this authority will be required 
to protect vulnerable persons, such as individuals with disabilities, 
homeless individuals or the elderly, who may repeatedly lose their 
Electronic Benefit Transfer (EBT) cards but are not committing fraud.
    FNS is also changing the EBT card replacement timeframes in the 
same section to require State agencies to make replacement cards 
available for pick up or to place the card in the mail within two 
business days following notice by the household to the State agency 
that the card has been lost or stolen. FNS is further amending 
regulations to define the term ``trafficking'' to include the attempt 
to buy or sell SNAP benefits in cases where an individual makes the 
offer to sell SNAP benefits and/or EBT card online or in person.
    Finally, FNS issued an interim final rule (with a request for 
additional comment) that requires State agencies to monitor EBT card 
replacement requests and send notices to those clients who have 
requested four cards within a 12-month period. The State agency shall 
be exempt from sending this Excessive Replacement Card Notice if it 
adopts the card withholding option in accordance with the final rule 
and sends the requisite Withhold Replacement Card Warning Notice on the 
4th replacement card request. The comment period is being extended to 
provide additional time for interested parties to review the interim 
final rule.

DATES: Effective November 1, 2013, the comment period for the interim 
final rule that was published on August 21, 2013 (78 FR 51649) has been 
extended from October 21, 2013 to November 6, 2013. The comment period 
on the information collection has been extended from October 21, 2013 
to November 6, 2013. To be assured of consideration, comments must be 
postmarked on or before November 6, 2013.

ADDRESSES: The Food and Nutrition Service, USDA, invites interested 
persons to submit comments on the interim rule provision Sec.  
274.6(b)(6). Comments may be submitted by one of the following methods:
     Federal e-Rulemaking Portal: Go to https://www.regulations.gov. Preferred method; follow the online instructions 
for submitting comments on docket 2012-0028.
     Fax: Submit comments by facsimile transmission to: Jane 
Duffield, Chief, State Administration Branch, Fax number 703-305-0928.
     Mail: Comments should be addressed to Jane Duffield, State 
Administration Branch, 3101 Park Center Drive, Room 818, Alexandria, VA 
22302.
     Hand Delivery or Courier: Deliver comments to Jane 
Duffield, State Administration Branch, 3101 Park Center Drive, 
Alexandria, VA 22302, Room 818, Monday-Friday, 8:30 a.m.-5:00 p.m.
All comments submitted in response to the interim rule provision will 
be included in the record and will be made available to the public at 
www.regulations.gov. Please be advised that the substance of the 
comments and the identity of the individuals or entities submitting the 
comments will be subject to public disclosure.

FOR FURTHER INFORMATION CONTACT: Jane Duffield, Chief, State 
Administration Branch, Food and Nutrition Service, USDA, 3101 Park 
Center Drive, Alexandria, Virginia, 22302. Ms. Duffield may be reached 
by telephone at 703-605-4385.

SUPPLEMENTARY INFORMATION:

Background

    In the final rule published on August 21, 2013 (78 FR 51649), FNS 
amended the SNAP regulations at 7 CFR 274.6, to give State agencies an 
option for handling requests for multiple replacement cards. Current 
regulations do not allow State agencies to require clients requesting 
multiple replacement cards to contact the agency and provide an 
explanation before a new card is issued, even though such requests may 
indicate fraudulent activity. Under this rule, State agencies may 
choose to withhold the benefit card when the client has requested an 
excessive number of replacements, until the client makes contact with 
the State agency to provide an explanation for the request. State 
agencies taking this option would be expected to establish a threshold 
beyond which the individual must make contact. That threshold may not 
be fewer than four cards in a 12-month period prior to the request, 
except in limited circumstances.
    Although the intent of the rule is not to systematically affect 
clients requesting fewer than four cards in a 12-month period, FNS 
recognizes that State agencies may obtain additional evidence 
indicating that a household is suspected of potential fraud that may 
warrant initiating the process sooner. For example, if a State agency 
receives a complaint that an individual sold their EBT card to another 
party, the State agency shall initiate an investigation and may 
promptly provide a notice to the client, requiring the individual or 
household to contact the State agency to provide an explanation prior 
to receiving a subsequent replacement card.
    FNS established the minimum threshold of four cards within a 12-
month period on the basis of an analysis of SNAP EBT electronic 
transaction records. FNS found that shopping behavior appeared 
consistent when compared to the average until a household requested its 
fourth replacement card. Transaction activity

[[Page 65516]]

indicates that, after the fourth replacement card, a household's 
shopping behavior is three times more likely to be flagged as potential 
trafficking by FNS' fraud detection system. Trafficking is the exchange 
of benefits for cash or other consideration, as defined at 7 CFR 271.2, 
and is the most egregious Program violation. Furthermore, FNS found 
during the period of January 2012 through December 2012, approximately 
98 percent of participating households had three or fewer EBT cards, 
with most (79 percent) utilizing only one card throughout the year. 
This further reinforces that most requests for replacement cards are 
legitimate and when they occur, it is most likely to replace a lost or 
damaged card. Since so few households request four or more replacement 
cards and those that do have such markedly different transaction 
activity as to indicate a higher likelihood of potential trafficking, 
FNS chose to define a minimum threshold, and to consider requests 
beyond four cards within a 12-month period to be considered excessive 
and a potential indicator of trafficking.
    Under this option, the State agency must notify the household when 
the threshold for excessive card replacements is reached, as determined 
by the State agency, and indicate that if a member of the household 
requests another card replacement, the State agency will withhold the 
card until contact is made. The State agency would be expected to 
contact the fraud investigation unit regarding clients who contact the 
agency but do not provide an appropriate explanation. The State agency 
must issue a replacement card during an ongoing investigation. In all 
cases, States would be required to protect vulnerable persons who lose 
EBT cards but are not committing fraud.
    FNS is further amending 7 CFR 274.6, to change the EBT card 
replacement timeframes, requiring State agencies to make replacement 
cards available for pick up or to place the card in the mail within two 
business days following notice by the client that the card has been 
lost, stolen, or damaged. Currently, State agencies must ensure clients 
receive replacement EBT cards within two business days (or five 
business days if using a centralized mail issuance system) after the 
client notifies the State agency that the card has been lost or stolen. 
This change places the requirement on the State agency issuance end 
instead of the on receiving end of the replacement card process, and 
alleviates State agencies' responsibility for mail delays beyond their 
control, while allowing FNS to hold State agencies more accountable for 
delays within their control.
    Additionally, the final rule amends the definition of trafficking 
to include actions that clearly express the attempt to sell or buy SNAP 
benefits or EBT cards in person or online through Web sites and social 
media.
    Finally, FNS is issuing an interim final rule provision at 7 CFR 
274.6(b)(6), that requires State agencies to monitor card replacement 
requests and issue Excessive Replacement Card Notices to clients who 
have requested four card replacements in a 12-month period. The State 
agency shall be exempt from sending this notice if it chooses to 
exercise the card withholding option, in accordance with 7 CFR 
274.6(b)(5), and sends the Withhold Replacement Card Warning Notice 
upon the household's fourth card replacement request, indicating that 
the State agency will withhold a fifth replacement card until the 
household contacts the State agency.
    FNS' decision to issue the interim final rule is based on a comment 
received in response to the proposed rule. The commenter suggested that 
the Department propose a method for handling multiple card requests 
similar to that initiated by North Carolina and recently implemented by 
the majority of States. The commenter added that the process has proven 
to be efficient and cost effective for State agencies. FNS agrees with 
this comment and is, therefore, amending the regulations in the same 
section, requiring States to monitor and send warning notices to 
clients who request four card replacements in a 12-month period. Based 
on current data, the number of clients requesting five or more cards 
has decreased nationally since many States adopted this practice. Since 
the majority of States currently monitor EBT card replacement requests 
and subsequently issue warning notices for four or more requests, FNS 
does not believe this provision will create a substantial burden for 
States overall.
    The proposed rule was published on May 30, 2012, at 77 FR 31738, 
and public comments were invited through July 30, 2012. All comments 
have been considered and adjustments have been made to the final and 
interim final rule. States administering SNAP are required to 
administer the Program in accordance with the provisions of the Act and 
regulations issued pursuant to the Act, including 7 CFR parts 271 and 
274.
    Failure to comply with the final rule and the interim final rule 
when they become effective would be subject to appropriate FNS action.

Summary of Comments and Explanation of Revisions

    Thirty-six comments to the proposed regulations were received from 
various stakeholders and are available for public inspection online at 
www.regulations.gov. In general, most commenters supported the 
regulations but not as currently written. FNS received eight comments 
in full support of the rule in its entirety. FNS received one comment 
which did not offer any comments on the contents of this rule but 
focused on other areas, such as retailer issues, which is being 
addressed in other FNS rulemaking. FNS also received comments with 
suggestions for additional ways to reduce trafficking or ways of 
handling EBT cards. Examples of these suggestions include making 
benefit cards larger, using neon colors, having a photo on the card, 
and charging for the cards, as much as $50.00 from one commenter. These 
comments were reviewed and considered but will not be included in this 
final rulemaking as they were not directly related to the proposal for 
a State option to withhold the card upon excessive card replacement 
requests until the household makes contact. FNS received three comments 
which stated that allowing four replacements is too many and that FNS 
is being too lenient. This comment was considered but is not included 
in the final rulemaking as FNS utilized a statistical basis for 
establishing the minimum threshold, one that differentiates between 
typical behavior and activity that is more likely to indicate fraud, 
while allowing States to initiate the process sooner if the State is in 
possession of additional evidence of trafficking.

Allow States To Withhold Replacement Cards Until Contact Is Made With 
the State Agency

    Several commenters suggested that the threshold for card 
replacements should be applied to individuals, not households, as some 
households contain more than one person with a card. These commenters 
further suggested that EBT cards that are never used should not count 
against the total for replacements. They pointed out that some clients 
may not use an EBT card because they request a card be mailed but then 
go to the office and pick up another card before receiving the card in 
the mail. Another commenter suggested that many first-time users do not 
understand how to use the card and a grace period in the beginning 
would benefit those clients. Multiple commenters felt that individuals 
must be provided notice before reaching the

[[Page 65517]]

threshold, as well as receiving a notice once they have exceeded the 
threshold. Two commenters stated the notice should clarify a reasonable 
timeframe for the individual to respond. Multiple commenters stated 
that the notice to the individual must contain contact information for 
individuals who would like to get more information or need help with 
their card. Some commenters further noted that the notice should 
contain information about what it means to be referred to the fraud 
unit and to meet with a fraud investigator. One commenter stated the 
rule is not clear that the contact can be made by phone or in person, 
and that it should be made clear that this is the client's choice. FNS 
received two comments regarding limited English proficiency, which 
suggested that notices must be sent in the individual's chosen 
language.
    The terms ``individual'' and ``household'' are both used in this 
rule and serve different purposes. FNS does not intend for this rule to 
require all members of the household make contact with the State agency 
before a replacement card can be issued. However, the household must 
receive the proper notification when the card will be withheld. The 
household must be aware of why the card is being withheld and 
understand what they are required to do in order to receive their card 
replacement. The term ``individual'' is used regarding the required 
contact by an individual member of the household. Further, only an 
individual who has been found guilty through an administrative or court 
hearing may be disqualified from SNAP, not the entire household, per 
regulations at 7 CFR 273.16(b)(11). FNS will retain in the final rule 
that all card replacement requests will count towards the threshold, 
regardless of the reason for the request.
    Some clients may not understand the State's process for how to 
request replacement cards or how long to expect the card replacement to 
take. For example, they may not understand that a replacement card is 
not needed every time the benefits are spent down or that once a card 
is requested, it may take a few days to receive the replacement. This 
may create situations where clients request additional cards while they 
are waiting for a replacement card to arrive. In such cases, the State 
would be able to determine that there is no suspicious activity and 
thus no reason to refer the case for a fraud investigation. In these 
situations, States have an opportunity to follow up with these cases 
and educate the clients about the appropriate replacement card process 
or otherwise intercede, such as appointing an authorized representative 
to help the household manage the EBT card.
    FNS believes that it is sufficient to notify the client once when 
they have reached the excessive card replacement threshold, prior to 
the State agency withholding the EBT card, and then once they exceed 
the threshold, at the times the State agency withholds the EBT card. 
The final rule requires that States implementing the card withholding 
option must send notices to the most recent address on file for all 
households who have reached or exceeded the excessive card replacement 
threshold. The State agency may only request an explanation, provide a 
5th replacement card, and if deemed appropriate, refer the case for 
investigation, after the State agency has sent the written notice to 
the household that the State agency is withholding the household's EBT 
card. If the State agency has an over-the counter issuance system in 
place, and the client comes in to request a 5th replacement card, the 
State agency must document that the client has first received the 
written warning notice to withhold the 5th replacement card prior to 
requesting an explanation from the client, replacing the card, and if 
deemed appropriate, referring the case for investigation.
    States are not required to include a timeframe in the notice 
because the State can continue to hold the card until the client 
contacts the State agency. It is up to the client to make the contact 
in order to receive their replacement card. If the client never makes 
contact with the agency, the card may be held indefinitely, likely 
until the client is up for recertification or benefits are expunged 
according to FNS regulations at 7 CFR 274.2(h).
    FNS has also clarified that the notices include information about 
how the client is to contact the State agency, including a telephone 
number. It is up to the State agency to determine how the contact 
should be made, such as in person or by phone, and the State agency 
must take into consideration those with special circumstances and make 
accommodations for compliance. FNS feels that notice requirements are 
adequate for their intended purpose and the notice does not require a 
statement about what it means to be referred for a fraud investigation. 
Not all households receiving these notices will be referred for an 
investigation; some are likely candidates for receiving educational 
information regarding the proper use of their card. State agencies 
should provide information on proper EBT card use on the notices. FNS 
will retain in the final rule the requirement that the State ensures 
that notices meet language requirements described at 7 CFR 272.4(b).
    FNS received several comments suggesting that any explanation 
provided by the individual that is not evidence of fraud is a 
satisfactory explanation. Commenters stated that FNS should make clear 
that the State may only initiate an investigation for fraud when the 
explanation provides evidence of fraud. One commenter stated that the 
language is too vague and permissive, and allows eligibility workers to 
interpret many legitimate explanations as suspicious. Another commenter 
points to 7 CFR 273.16(a), which states that the disqualification or 
prosecution process cannot be initiated unless the State agency has 
sufficient documentary evidence to substantiate fraud.
    The final regulation does not specify which client explanations for 
needing card replacements are suspicious and which are satisfactory. 
FNS requires States to refer individuals for fraud investigations and 
conduct investigations on all cases that the State agency has 
determined suspicious. The State is not required to have evidence in 
order to conduct an investigation. The purpose of the investigative 
process is for the State agency to determine if fraudulent behavior 
occurred, and to gather evidence in order to pursue a disqualification 
and/or criminal charges where appropriate. If the State cannot gather 
enough evidence, then the case would not be taken through the 
administrative disqualification hearing (ADH) process or prosecuted, 
and no disqualification penalty will be assigned. If the State has 
gathered enough evidence of an Intentional Program Violation (IPV), the 
case will be heard by the appropriate authority, who will make a 
determination as to whether the individual committed an IPV. 7 CFR 
273.16(a) does not preclude a State agency from conducting an 
investigation to collect evidence, rather it specifies that the case 
may not be taken to an ADH or prosecuted without sufficient documentary 
evidence--which is gathered during the investigation.
    One commenter stated that, if the State provides a replacement card 
to a household that has made contact but has not provided an 
explanation for the need to replace the card, the State has rewarded 
the household for non-cooperation. Another commenter stated that 
clients will not cooperate or show up because there is no reason to do 
so, and FNS should revise the rule to allow the State agency to close 
the case if the recipient fails to keep the interview

[[Page 65518]]

appointment or refuses to cooperate during investigations.
    FNS does not view the release of the EBT replacement card upon 
contact with the State agency as rewarding the household for failing to 
cooperate. This process provides the State agency an opportunity to 
address the issue with the client to determine if the behavior may be 
indicative of fraud. In cases where the client does not provide a 
reasonable explanation for the requests, the State agency must refer 
the case to the State's fraud investigation unit. This final rule is 
intended to provide a tool for States to use as a means of assessing 
these cases of multiple card replacements. It is not intended as a 
means for a State agency to terminate or close a case.
    State agencies may not terminate or close a case where the client 
has not been found guilty of an IPV through an ADH or a court hearing. 
Clients have the right to remain silent and have their cases heard by 
the appropriate authority. Until the client has been found to have 
committed an IPV, the case may not be closed. This final rule allows 
the State agency to hold the card until the household makes contact in 
order to help the State agency determine why they are requesting so 
many cards. If the client refuses to cooperate by not providing an 
explanation, this should be taken into consideration and the case must 
be turned over for an investigation. However, withholding the card 
until contact is made, regardless of client cooperation, does not 
affect the client's eligibility for the Program.
    One commenter stated that the rule should ensure that States 
replace cards without any undue delays, such as lengthy waits in State 
agency offices, lack of access to in-person appointments or inability 
to reach someone at the State agency by phone. FNS agrees that the 
State agency must ensure they have a process in place to handle these 
cases and there is not a delay in issuing the card when the client 
complies with the requirement to contact the State agency after 
reaching the excessive card threshold for replacement cards. The 
regulation has been modified to require State agencies to mail or make 
the replacement card available for pick up within two business days 
after the client contacts the State agency to provide an explanation.
    FNS received 11 comments requesting guidance be provided for States 
that use EBT cards for both SNAP and cash assistance. One commenter 
expressed concerns as some States use EBT cards for SNAP, cash benefits 
and Medicaid. The commenter stated that if the card is also used to 
deliver cash aid, such as Temporary Assistance for Needy Families 
(TANF), it cannot be withheld or delayed unless the cash assistance 
program provides for this. FNS recognizes the challenge where EBT cards 
are used for multiple programs and reiterates that the process for 
withholding the card in these cases is a State agency's option and not 
a requirement. FNS has conferred with the United States Department of 
Health and Human Services (HHS), which has responsibility for the TANF 
Program, and determined there are no TANF rules preventing States from 
invoking this option. FNS urges State agencies to work with other 
assistance programs delivered on the State's EBT card, such as 
Medicaid, to determine solutions that may address this issue. FNS is 
willing to assist States in this process.
    FNS received four comments regarding the increased workload issues, 
costliness and requirement of massive system changes to implement this 
rule. These comments expressed that this option will create a lot of 
work for State agencies, and the agencies will not get much in return 
for the extra effort. State agencies may choose not to implement this 
process because they decide it is not a good use of limited State 
resources.
    One commenter is concerned with implementing this rule timely, and 
the ability or willingness of EBT contractors to make the necessary 
changes for reports on card replacements. This section of the final 
rule, allowing State agencies to withhold the EBT card until contact is 
made, is an agency option designed to provide States with a tool to 
assist in identifying and disqualifying those who are committing IPVs 
against SNAP, as well as to educate those who do not understand how to 
properly use their EBT card. FNS is not requiring State agencies to 
implement this option and therefore has no requirement for agencies to 
comply in a timely manner. FNS encourages State agencies that want to 
exercise this option to meet with their EBT processors to discuss which 
reports will be useful and identify their needs so that the EBT 
processors can determine the best way to support this process. 
Identifying and disqualifying anyone who commits an IPV by requesting 
multiple card replacements and trafficking SNAP benefits sends a strong 
message that abuse of the Program will not be tolerated.
    FNS received one comment stating that the rule should direct State 
agencies to inquire whether an individual who repeatedly requests card 
replacements needs some accommodation and to investigate the 
feasibility of allowing restrictions on recipients with disabilities to 
only use their EBT cards in certain stores. FNS received five comments 
that the rule should provide much more detail about what the State 
agency should do to protect victims of crime, the homeless and persons 
with disabilities. One commenter was concerned that a State agency may 
require only in-person meetings to get information about excessive card 
replacements, thus placing severe hardship on the elderly and disabled. 
Another commenter was concerned about the noticing requirements to the 
homeless population, making this difficult and impractical to apply 
equitably to them. Another commenter stated that the homeless should 
not be excluded from providing an explanation for excessive requests 
for card replacements. These comments suggested that FNS should provide 
guidance on specific steps to protect vulnerable populations and the 
definition of vulnerable population should be expanded to include other 
groups, such as illiterate populations and victims of domestic 
violence.
    FNS expects that State agencies will work to ensure no undue 
hardships are placed on the elderly or disabled and the accommodations 
State agencies typically make available to comply with federal 
regulations will also be made available for them if a State agency 
invokes this option. The Agency thinks the rule is sufficiently clear 
in this regard. FNS does not have the legal authority to restrict or 
limit card usage to certain authorized retailers. This option to 
withhold the card is a tool for State agencies to monitor the integrity 
of the Program and FNS expects State agencies will follow all existing 
requirements and regulations if they choose to exercise this option.
    The State agency should make every effort to reach those clients 
who are known to be homeless and to take that circumstance into 
consideration when these clients reach their card threshold. For 
example, if a State agency suspects that the client is in a vulnerable 
status group such as the elderly, disabled, or homeless and needs 
additional accommodation, the State agency may choose to contact the 
client for purposes of collecting information for the card replacement 
option; however, the State agency must still send a warning notice to 
the most recent address on file prior to requesting an explanation and 
providing the 5th EBT card replacement. Some State agencies also allow 
clients who do not list an address to pick up their notices in the 
local office. State agencies may opt to give written notice to homeless 
clients and

[[Page 65519]]

discuss excessive card replacements when homeless clients come into the 
State agency office to request a card that exceeds the threshold. Those 
clients which are part of the vulnerable populations are not excluded 
from providing an explanation but may need accommodations to assist 
them in providing the explanation.
    State agencies should take the household's circumstances into 
account when considering their explanation for needing multiple 
replacements. The regulation, as written, encompasses other vulnerable 
populations, such as those who are illiterate, those with language 
barriers and victims of domestic violence, which allows for State 
agencies to make a determination as they become aware of a client's 
circumstance. FNS has removed references that suggest that contact must 
be made by phone or in-person. While phone and in-person contact is 
acceptable, this will provide State agencies the flexibility to offer 
other contact options to those with special circumstances.
    Several comments asked for FNS to clarify what sufficient 
additional evidence they would need to provide to warrant withholding a 
card sooner than the threshold. A commenter also stated that the 
evidence be specific to the individual, rather than a characteristic 
that they may share with others, such as residency or the food store 
where they shop. There are many circumstances a State may become aware 
of that would make them want to take action sooner. State agencies may 
in fact receive evidence that direct them to a particular household 
based on activity by one household member or transactions conducted at 
a store under suspicion of trafficking. A State agency may receive a 
complaint indicating that a client is selling their card for cash and 
then requesting a replacement card. Or a State agency may flag a client 
based on suspicious transaction activity that is indicative of 
trafficking. Some clients may already be under investigation and the 
State agency may already have additional evidence in their case when 
the client makes another card request. These are examples of cases 
where the State agency has additional evidence that may warrant 
noticing the client sooner than the determined threshold. By 
determining four cards within a 12-month period as excessive, FNS is 
providing State agencies with its expectation of how to respond 
systematically. The minimum threshold is not intended to preclude a 
State agency from initiating the process sooner for individual 
households if they have additional evidence that warrants doing so, to 
ensure that potential trafficking situations are identified and acted 
upon quickly.
    FNS received four comments that interrupting the household's access 
to benefits by delaying or denying a replacement card would deny the 
household its right to a predetermination hearing under 7 CFR 273.15, 
section 11(e)(10) of the Act, and due process clauses as interpreted by 
Goldberg v. Kelly, 397 US 254 (1970). Another commenter stated that, 
since these are adverse actions, if the client does not contact the 
State agency, the regulation must provide that the notice include 
information about fair hearing rights.
    FNS does not agree that the rule fails to provide due process. FNS 
currently allows State agencies the choice to make cards available to 
clients either by coming to the office to pick them up or by mail. 
While most State agencies use a central mail process to issue cards, 
there are agencies which only use the over-the-counter method for 
issuing cards to clients. Other State agencies use the over-the-counter 
method but will mail cards in special circumstances. This has always 
been a State agency's option and FNS does not consider the over-the-
counter method as interrupting a household's access to benefits or 
violating due process requirements. The cards and benefits are 
available for the client once the card is made available pursuant to 
current regulations at 7 CFR 274.6(b). Similarly, when the State agency 
chooses to withhold the card until the client makes contact, those 
agencies must make the card available, pursuant to 7 CFR 274.6(b) in 
this final rule, to the client once the client makes the required 
contact. Furthermore, as stated earlier, eligibility remains unaffected 
by this process. The benefits the household has been determined 
eligible to receive are made available on the EBT card as long as the 
household remains eligible and the client has access to the card by 
making the required contact with the State agency. Therefore, because 
the withholding of a replacement card in accordance with this final 
rule is not an adverse action, Section 11(e)(10) of the Act and 7 CFR 
273.15 do not apply.
    Commenters also stated that there is the possibility of coercion 
because the threat of delay of benefits forces someone to incriminate 
themselves. FNS does not believe that this would be coercion because 
the client is not required to provide an explanation in order to 
receive their card. The card will be given to the client regardless of 
their willingness to answer questions or otherwise cooperate beyond 
making contact. State agencies are expected to clearly explain in their 
notice to clients that clients must contact the State agency but that 
they are not required to provide an explanation in order to receive a 
replacement card. Notices to clients should explain that the process is 
being used to yield useful, accurate information and will not be used 
in a way that might harass or coerce clients into making false 
statements.
    FNS received one comment stating that the commenter was unclear how 
withholding the card improves trafficking prevention if FNS has the 
ability to track EBT data. By withholding the card, FNS believes it 
provides the State agency with the necessary tools to obtain sufficient 
information from a household in order to determine the nature of the 
excessive card replacement requests. This information allows the State 
agency to better determine whether the request is legitimate and 
indicates a need to educate the household on how to better manage their 
EBT card, or that an explanation is suspicious and warrants a referral 
for investigation.
    Another commenter asked that further clarification should be 
provided concerning the analysis used to determine the four card 
threshold. FNS determined the minimum threshold of four cards within a 
12-month period based on the fact that 98 percent of households use 
three or fewer cards within a year, with most (79 percent) using only 
one card. Also, for those that exceed the fourth replacement card, 
their transaction activity is three times more likely to be flagged as 
trafficking by FNS' fraud detection system.
    FNS received one comment that the rule is restrictive since State 
agencies are unable to make contact for subsequent replacement requests 
beyond the threshold level unless the pattern has changed. The 
commenter suggests that each person is limited to one call or visit to 
explain the circumstances for the request and this does not do much to 
deter fraud. If the State agency has spoken with the client or 
conducted an investigation and found no evidence of fraud, the agency 
may not continue to withhold that card. However, the State agency 
should continue to monitor additional card requests, and if the 
household continues to request additional cards and the pattern of card 
activity changes to indicate possible trafficking behavior, the State 
agency may notify the household that the State agency is withholding 
the EBT card and that the household must contact the State agency to 
provide an explanation before receiving another card.

[[Page 65520]]

    FNS received multiple comments referencing the rule is too lenient 
and allowing four cards is too many. As noted above, the minimum 
threshold is based on an analysis by FNS of electronic transaction 
data, which demonstrates a statistically significant difference when a 
household requests a fourth replacement card indicating that 
transaction activity is three times more likely to be flagged as 
potential trafficking, compared to clients with three or fewer 
replacement cards. As the intent of the rule is to further strengthen 
program integrity, FNS believes that the threshold of four cards within 
a 12-month period is appropriate. However, FNS acknowledges that State 
agencies may want to initiate the process sooner if they have 
additional evidence that a household is suspected of trafficking, thus 
the final rule maintains this provision.

Required Excessive Replacement Card Notice

    In new paragraph 7 CFR 274.6(b)(6), FNS has included a requirement 
in this interim rule that State agencies monitor requests for EBT card 
replacements and send a Excessive Replacement Card Notice to clients 
who request four cards in a 12-month period. If a client requests a 
fifth replacement card, the State agency shall refer the case to the 
State's fraud investigation unit, if they suspect the client is 
trafficking. If the State agency suspects the client's lack of 
understanding of how to manage an EBT card is the reason for requesting 
excessive replacement cards, no referral for investigation is warranted 
and, therefore, should not be made.
    If the State agency chooses to exercise the option to withhold the 
replacement card until it is contacted by the client, and as long as 
the threshold used for the initial Withhold Replacement Card Warning 
Notice is on the fourth card replacement request, the State agency 
shall be exempt from sending the Excessive Replacement Card Notice, in 
accordance with 7 CFR 274.6(b)(6)(i). If the State agency chooses the 
option to withhold the replacement card and uses a threshold higher 
than the fourth card replacement request for the initial notice, the 
State agency must send the Excessive Replacement Card Notice upon the 
fourth card request in accordance with 7 CFR 274.6(b)(6). This interim 
rule provides a minimum requirement for the contents of the required 
Excessive Replacement Card Notice. States may contact FNS for specific 
examples. Paragraph 274.6(b)(6) is being published as an interim final 
rule in order to provide the opportunity for comment.
    The decision to include paragraph 274.6(b)(6) as an interim rule is 
based on a comment received on the proposed regulation. The comment 
notes that FNS has touted the North Carolina agency's approach to 
handling multiple card replacements the State agency sends a letter to 
any household requesting four or more cards in a 12-month period and if 
another request is made, refers the case to the State's fraud 
investigation unit. The commenter added that the model to use a letter 
to deter excessive card replacements has proven to be very effective 
and less burdensome for State agencies and should have been reflected 
in the proposed regulation. FNS agrees with the commenter that the 
North Carolina agency's model is a reasonable and simple process and is 
aware that the majority of State agencies are currently issuing notices 
based on this model.
    FNS believes that all State agencies should be monitoring card 
replacement activity and that the requirement to issue an Excessive 
Replacement Card Notice, as set forth in this interim final rule, along 
with the option to withhold a replacement card until the client 
contacts the State agency, as set forth in the final rule, provide 
important tools for State agencies to use in monitoring and preventing 
trafficking of EBT cards. Since the majority of States currently send 
warning notices to households with four or more replacement card 
requests, FNS does not believe the noticing requirement will 
substantially increase the burden for State agencies overall.

Card Replacement Timeframes

    Thirteen commenters addressed the provision prescribing a one 
business day timeframe when State agencies must make a replacement card 
available for pick up or place a replacement EBT card in the mail 
instead of when the client must actually receive the EBT card.
    Some commenters believed the proposed change is unwarranted and 
would result in delaying benefits to needy households. Other commenters 
wanted FNS to require that State agencies replace EBT cards within 7 
days when mailing cards instead of requiring that State agencies place 
the card in the mail within one business day.
    Because State agencies do not have control over the length of time 
it takes the United States Postal Service (USPS) to get replacement EBT 
cards into the hands of SNAP households, FNS believes that prescribing 
when States must act on a card replacement request is a better approach 
to minimize possible delays that are beyond the States' control. In the 
end, FNS expects that the new provision will better ensure that SNAP 
households receive their replacement cards within a reasonable amount 
of time, while also giving FNS greater ability to hold State agencies 
accountable for delays within their control.
    Another commenter felt the proposed requirement for placing the 
card in the mail within one day is too restrictive because State 
agencies need more days to investigate and verify instances of identity 
theft or other possible abuses. Another commenter felt State agencies 
should be able to determine their own timeframes for mailing or making 
replacement cards available, depending on the number of replacement 
cards requested, the reason for the request, and other factors. The 
commenter added that if the replacement is questionable, but does not 
prove fraud, the State agency would then be able to extend the 
timeframe to a longer period so the household is penalized. The 
proposed rule specifically provides State agencies the opportunity for 
further investigation, if there have been multiple card replacement 
requests before having to provide another card. As a result, State 
agencies now have the ability to delay a card replacement until contact 
is made for an individual household that meets the threshold for 
excessive card replacements or whose request is questionable based on 
available evidence. At the same time, FNS continues to believe clients 
who have legitimately lost their card or had it stolen must receive a 
replacement card within a reasonable amount of time to ensure they have 
access to benefits necessary to meet their dietary needs. Therefore, in 
an effort to take the different perspectives into consideration, FNS 
has decided to extend the timeframe by when State agencies must act on 
card replacement requests that do not meet the criteria for further 
investigation to two business days instead of one.
    Several commenters also requested FNS specifically prohibit the use 
of bulk mail, indicating that many State agencies use bulk mail postage 
to reduce costs, which results in delayed mailings as a State agency 
waits to amass enough items to reach the bulk rate minimum. As a 
result, bulk mail may not be delivered for several weeks, in contrast 
to the typical delivery time of 5 days for regular mail. Under the new 
provision, State agencies must meet the required two-day timeframe for 
acting on card replacement requests. Therefore, they cannot wait to 
amass enough replacement cards to reach the minimum requirement for 
bulk rate

[[Page 65521]]

mailings. Furthermore, the use of first class mail for issuing cards is 
already required under 7 CFR 274.2(b). However, FNS is convinced of the 
importance of specifically requiring first class mail when mailing 
replacement cards in order to prevent excessive delays in getting 
clients the access they need to their benefits. Therefore, under Sec.  
274.6, we are specifically requiring that State agencies issue 
replacement cards in accordance with the requirement under Sec.  274.2 
to use first-class mail and sturdy non-forwarding envelopes when 
mailing EBT cards.
    One commenter requested that FNS specifically prohibit mailing 
Personal Identification Numbers (PINs) with EBT cards, while another 
commenter asked that both the card and PIN be mailed within one 
business day. The proposed provision required that State agencies mail 
EBT cards and PINs in accordance with industry standards. In general, 
States agencies no longer mail assigned PINs and all provide clients 
with the ability to select their own PIN through an automated response 
unit. However, FNS understands that PINs must be mailed separately from 
EBT cards to prevent theft and fraudulent use of the card and that 
clients cannot access their benefits without the PIN. Therefore, for 
those State agencies that mail assigned PINs or provide that option, we 
are specifically requiring that PINs and cards be mailed separately and 
PINs be mailed one business day after the card is mailed. This 
requirement applies to both initial issuance and card replacements.
    Several other commenters felt State agencies should be required to 
explain to the household their options for mailing or picking up a 
replacement card and the timeframe associated with both. FNS wishes to 
clarify that State agencies are not required to provide both mailing 
and pick-up options, nor did FNS propose all State agencies should now 
offer both options. In general, State agencies rely mostly on one 
method or the other, providing the alternative option in only special 
circumstances. Because there are both advantages and disadvantages 
associated with each option, FNS continues to believe that State 
agencies are in the best position to decide which option better meets 
the needs of their SNAP population. Furthermore, training requirements 
in 7 CFR 274.2(e) already require State agencies to inform all 
households of the card replacement policies. Therefore, FNS will 
continue to rely on the existing provision for informing clients of the 
card replacement timeframes and possible options.
    Finally, in response to a comment regarding the timeframes for 
cards other than those that are lost or stolen, FNS is including 
damaged cards in the card replacement provision in order to be 
consistent with related language in other provisions.

Clarify the Definition of Trafficking

    In the proposed rule, FNS clarified the definition of trafficking 
to include the intent to sell SNAP benefits. FNS received numerous 
comments that the definition of trafficking should use the word 
``attempt'' instead of ``intent.'' Commenters state that the word 
``intent'' permits State agencies to take action based on what people 
are thinking and not what they are doing. ``Attempt'' consists of the 
intent to do an act, an overt action beyond mere preparation, and the 
failure to complete the act. FNS also received numerous comments that 
the definition of ``trafficking'' should include the word ``buy'' as 
well as the word ``sell''. FNS agrees with both of these comments and 
has made this change in the final regulation language.
    FNS received one comment that the rule should make clear that the 
party found to have committed an IPV is the individual who violates, or 
attempts to violate, the Program. Other members of the household, 
including the head of household, should not be found to have committed 
an IPV if they are not involved in the activity. FNS agrees with this 
comment. FNS regulations under 7 CFR 273.16(b)(11) are clear that IPVs 
are assigned to individuals who are found guilty and not the entire 
household. FNS expects State agencies to comply with FNS regulations 
and only the household member who committed the IPV is disqualified 
from the Program. As this perspective is already clear in regulation, 
no additional modifications are being made.
    FNS received one comment that adding to a definition that already 
prohibits this behavior is an expansion, not a clarification. The 
comment further states that USDA already clarified in a policy memo 
that the regulations already prohibit this behavior. FNS agrees that it 
is amending the definition of ``trafficking'' to include the attempt to 
buy and sell benefits, thus giving State agencies expanded means to 
target both retailers and recipients who attempt to buy or sell SNAP 
benefits online or in person.
    FNS received five comments regarding eliminating the reference to 
``coupons.'' FNS also received one comment that the definition should 
include both recipients and retailers. A final rule titled, 
Supplemental Nutrition Assistance Program (SNAP): Updated Trafficking 
Definition and Supplemental Nutrition Assistance Program--Food 
Distribution Program on Indian Reservations Dual Participation, 78 FR 
11967 (Feb. 21, 2013) eliminates coupon terminology from the 
trafficking definition and applies the trafficking definition to both 
clients and retailers.

Procedural Matters

Executive Order 12866

    This rule has been determined to be not significant and was 
reviewed by the Office of Management and Budget (OMB) in conformance 
with Executive Order 12866.

Regulatory Flexibility Act

    This rule has been reviewed with regard to the requirements of the 
Regulatory Flexibility Act (RFA) of 1980, 5 U.S.C. 601-612. Pursuant to 
that review, it has been certified this rule would not have a 
significant impact on a substantial number of small entities. State 
agencies that distribute Supplemental Nutrition Assistance Program 
benefits are the entities affected by this change.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local and Tribal 
governments and the private sector. Under section 202 of the UMRA, the 
Department generally must prepare a written statement, including a cost 
benefit analysis, for proposed and final rules with ``Federal 
mandates'' that may result in expenditures by State, local or Tribal 
governments, in the aggregate, or the private sector, of $100 million 
or more in any one year. When such a statement is needed for a rule, 
Section 205 of the UMRA generally requires the Department to identify 
and consider a reasonable number of regulatory alternatives and adopt 
the most cost effective or least burdensome alternative that achieves 
the objectives of the rule.
    This final rule does not contain Federal mandates (under the 
regulatory provisions of Title II of the UMRA) for State, local and 
Tribal governments or the private sector of $100 million or more in any 
one year. Thus, the rule is not subject to the requirements of sections 
202 and 205 of the UMRA.

Executive Order 12372

    The Supplemental Nutrition Assistance Program is listed in the 
Catalog of Federal Domestic Assistance Programs under 10.551. For the 
reasons

[[Page 65522]]

set forth in the final rule in 7 CFR part 3015, subpart V, and related 
Notice (48 FR 29115, June 24, 1983), this program is included in the 
scope of Executive Order 12372, which requires intergovernmental 
consultation with State and local officials.

Federalism Summary Impact Statement

    Executive Order 13132, requires Federal agencies to consider the 
impact of their regulatory actions on State and local governments. 
Where such actions have federalism implications, agencies are directed 
to provide a statement for inclusion in the preamble to the regulations 
describing the agency's considerations in terms of the three categories 
called for under Section (6)(b)(2)(B) of Executive Order 13132. FNS has 
considered this rule's impact on State and local agencies and has 
determined that because the majority of States currently send warning 
notices to households with four or more replacement card requests, this 
rule does not have federalism implications under Executive Order 13132. 
This rule does not impose substantial or direct compliance costs on 
State and local governments. Therefore, under Section (6)(b) of the 
Executive Order, a federalism summary impact statement is not required.

Executive Order 12988

    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This final 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 and timely implementation. This rule is not intended to have 
retroactive effect unless so specified in the Effective Dates section 
of the final rule. Prior to any judicial challenge to the provisions of 
the final rule, all applicable administrative procedures must be 
exhausted.

Civil Rights Impact Analysis

    FNS has reviewed this final rule in accordance with the Department 
Regulation 4300-4, ``Civil Rights Impact Analysis,'' to identify and 
address any major civil rights impacts the rule might have on 
minorities, women and persons with disabilities. After a careful review 
of the rule's intent and provisions, FNS has determined that this rule 
will not in any way limit or reduce the ability of protected classes of 
individuals to receive SNAP benefits on the basis of their race, color, 
national origin, sex, age, disability, religion or political belief nor 
will it have a differential impact on minority owned or operated 
business establishments, and women owned or operated business 
establishments that participate in SNAP.

Executive Order 13175

    Executive Order 13175, requires Federal agencies to consult and 
coordinate with tribes on a government-to-government basis on policies 
that have tribal implications, including regulations, legislative 
comments or proposed legislation, and other policy statements or 
actions that have substantial direct effects on one or more Indian 
tribes, on the relationship between the Federal government and Indian 
tribes, or on the distribution of power and responsibilities between 
the Federal Government and Indian tribes. In November of 2011 and May 
of 2013, USDA engaged in a series of consultative sessions to obtain 
input by Tribal officials or their designees concerning the impact of 
this rule on the tribe or Indian Tribal governments, or whether this 
rule may preempt Tribal law. Reports from these sessions for 
consultation will be made part of the USDA annual reporting on Tribal 
Consultation and Collaboration.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. Chap. 35; see 5 CFR 
1320) requires the Office of Management and Budget (OMB) approve all 
collections of information by a Federal agency before they can be 
implemented. Respondents are not required to respond to any collection 
of information unless it displays a current valid OMB control number. 
This final and interim final rule contains information collections that 
are subject to review and approval by OMB. Therefore, FNS has submitted 
an information collection under 0584--NEW, which contains the burden 
information in the rule for OMB's review and approval. The new 
provisions in this rule, which increase current burden hours by 8,336 
hours, will be merged into Supplemental Nutrition Assistance Program 
(SNAP) Forms: Applications, Periodic Reporting, Notices, OMB Control 
Number 0584-0064, expiration date 4/30/2016. These changes are 
contingent upon OMB approval under the Paperwork Reduction Act of 1995. 
When the information collection requirements have been approved, the 
Department will publish a separate action in the Federal Register 
announcing OMB's approval.
    Comments on the information collection in this final and interim 
final rule has been extended from October 21, 2013 to November 6, 2013. 
Send comments to the Office of Information and Regulatory Affairs, OMB, 
Attention: Desk Officer for FNS, Washington, DC 20503. Please also send 
a copy of your comments to Jane Duffield, State Administration Branch, 
3101 Park Center Drive, Alexandria, VA 22302. For further information, 
or for copies of the information collection requirements, please 
contact Jane Duffield at the address indicated above. Comments are 
invited on: (1) Whether the proposed collection of information is 
necessary for the proper performance of the Agency's functions, 
including whether the information will have practical utility; (2) the 
accuracy of the Agency's estimate of the proposed information 
collection burden, including the validity of the methodology and 
assumptions used; (3) ways to enhance the quality, utility and clarity 
of the information to be collected; and (4) ways to minimize the burden 
of the collection of information on those who are to respond, including 
use of appropriate automated, electronic, mechanical, or other 
technological collection techniques or other forms of information 
technology. All responses to this request for comments will be 
summarized and included in the request for OMB approval. All comments 
will also become a matter of public record.
    Title: Supplemental Nutrition Assistance Program: Trafficking 
Controls and Fraud Investigations.
    OMB Number: 0584--NEW.
    Expiration Date: Not Yet Determined.
    Type of Request: New Collection.
    Abstract: This rule codifies provisions for State Agencies to issue 
warning notices to withhold replacement cards or a notice for excessive 
replacement cards.
    Withhold Replacement Card Warning Notice: State agencies may 
require an individual member of a household to contact the State agency 
to provide an explanation in cases where the number of requests for 
card replacements is determined excessive. The State agency must notify 
the household in writing when it has reached the threshold, indicating 
that the next request for card replacement will require the client to 
contact the State agency to provide an explanation for the requests, 
before the replacement card will be issued. The State agency must also 
notify the household in writing once the threshold has been exceeded 
and the State agency is withholding the card until contact is made.
    Excessive Replacement Card Notice: State agencies must monitor all 
client requests for EBT card replacements and send a notice, upon the 
fourth request in a 12-month period, alerting the

[[Page 65523]]

household their account is being monitored for potential, suspicious 
activity. The State agency is exempt from sending this notice if they 
have chosen to exercise the option to withhold the replacement card 
until contact is made with the State agency.
    The average burden per response and the annual burden hours are 
explained below and summarized in the charts which follow.
    Respondents for this rule: State and Local Agencies; Households.
    Estimated Number of Respondents for this rule: 23,864.
    Estimated Number of Responses per Respondent for this rule: 2.49.
    Estimated Total Annual Responses: 59,528.
    Estimated Total Annual Burden on Respondents for this rule: 8,336.

               Estimated Annual Burden for 0584--New Supplemental Nutrition Assistance Program: Trafficking Controls and Fraud, 7 CFR 274
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                           Number of                       Total annual    Burden hours    Total burden
                   CFR                                Title               respondents    Annual reports     responses      per response        hours
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        Affected Public: State and Local Agencies
--------------------------------------------------------------------------------------------------------------------------------------------------------
274.6(b)(5)..............................  Withhold Replacement Card               26.5          449.26         11,905.5          0.0334          397.64
                                            Warning Notice.
274.6(b)(5)..............................  Replacement Card Withheld               26.5          449.26         11,905.5          0.0334          397.64
                                            Notice.
274.6(b)(6)..............................  Excessive Replacement Card              26.5          449.26         11,905.5          0.0334          397.64
                                            Notice.
                                                                       ---------------------------------------------------------------------------------
    Subtotal.............................  ...........................             53           673.896         35,716.5          0.0334        1,193
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Affected Public: Households
--------------------------------------------------------------------------------------------------------------------------------------------------------
274.6(b)(5)..............................  Withhold Replacement Card           11,905.5               1         11,905.5             0.3        3,571.65
                                            Warning Notice.
274.6(b)(5)..............................  Replacement Card Withheld           11,905.5               1         11,905.5             0.3        3,571.65
                                            Notice.
                                                                       ---------------------------------------------------------------------------------
    Subtotal.............................  ...........................         23,811                 1         23,811               0.3        7,143.30
                                                                       ---------------------------------------------------------------------------------
        Grand Total......................  ...........................         23,864             2.494         59,527.5          0.1400        8,336
--------------------------------------------------------------------------------------------------------------------------------------------------------
The 8,336 burden hours will be merged with OMB 0584-0064.


    Dated: October 28, 2013.
Audrey Rowe,
Administrator, Food and Nutrition Service.
[FR Doc. 2013-26265 Filed 10-31-13; 8:45 am]
BILLING CODE 3410-30-P