Comments of The National Consumer Law Center on Food Stamp Program: Electronic Benefits Transfer Benefit Adjustments
Submitted to United States Department of Agriculture Food and
Nutrition Service (RIN: 0584-AC61)
On behalf of our low income clients, the National Consumer Law
Center[1]
is pleased to take this opportunity to comment on the proposed rules allowing
adequate notice of adjustments and a change in the fair hearing procedure. The
proposed changes to the rules are basically appropriate, and we applaud the
Department of Agriculture for making these changes so gingerly. We caution,
however, that these alterations to recipients' due process rights should not
be the basis for future infringements, and we further suggest some essential
refinements in several specific areas of these regulations: 1) the definition
of system error should be specific and clear; 2) the types of information that
must be included within the contemporaneous notice provided to the recipients
should be spelled out in the regulations more specifically; and 3) necessary
error resolution procedures should be developed for application to electronic
benefit transfers of foods stamps.
Food Stamp recipients need to have maximum choice about where
they can shop. Some have special dietary needs that cannot always be met by
large supermarket chains, and require access to their benefits at small specialty
stores or farmers markets, where on-line EBT may not be available. Others may
not have dietary restrictions limiting their choice of grocers, but may live
in communities not served by the large food chains that are more likely to provide
POS access. Thus, the proposed rules are important for the purposes of accommodating
merchants who otherwise may be reluctant to conduct EBT transactions and need
assurances that they will be paid in a timely manner should they opt to participate
in the EBT system.
1) Definition of System Errors
First, the regulations must include a specific definition of "system error"
which results in an out-of-balance settlement condition. Secondly, the definition
should only include computer or mechanical errors, not human errors which result
from the merchant's incorrect entry of the amount to be debited. Examples of
system error should include errors that can be made at a variety of processing
points, beginning with the merchant and ending with the State. Some of those
errors may arise as a result of a technical, non-human malfunction, such as
a computer crash or software glitch. Other errors may be a technician's incorrect
input (as opposed to the merchant's mistake). For example, in a case where
a merchant receives telephone authorization for a manual transaction, and the
processor fails to input the proper information into the system, the merchant
should be able to obtain immediate credit to his account once the error has
been determined. These appear to be the kinds of errors contemplated by the
proposed rules and this should be stated more clearly.
Other errors, which
occur as a result of the merchant's mistakes, should not receive special status
allowing for an exception from the general advance notice procedures. For example,
where a merchant has input $1.20 but the proper amount to be debited should
have been $12.00, the exception for system errors should not apply.
The exceptions from due process and advance notice proposed in these regulations
should only apply to situations where all parties involved in the transaction
can readily agree there is no dispute, because the system simply broke down
during the transaction.
The current rules requiring prior notice and a hearing
should explicitly still apply in situations of most human errors (by the merchant)
to prevent attempts at automatic adjustments of alleged overpayments or electronic
debiting of benefits without prior notice or hearing rights. There is a body
of law in public benefits that over the years has established prior notice and
hearing rights before an agency can recoup an alleged overpayment or take any
other action that results in the reduction of a family's needs based benefits,
other than for reasons having to do with an across the board cut in coverage
or benefit levels.[2]
But some state EBT programs have not recognized the effect of these requirements
and have included system designs that provide for automatic electronic debiting
whenever there appears to be reason to adjust the amount of the benefits due.
A clearly stated prohibition of this activity should be included in these
rules. In other words, only system errors should be allowed to be corrected
without advance notice, not merchant error.
Third, the definition of "system error" should specifically include
the situation where the recipient's account has been incorrectly posted with
too low an amount -- too much money was incorrectly debited from the recipient
or too few food stamp benefits were credited to the account. Recipients will
suffer immediate hardship from the loss of funds incorrectly removed from their
account as well as from system errors that incorrectly credit the monthly food
stamp allotment, and thus should be entitled to an immediate correction of such
system errors.
Finally, the reference in § 274.12(f)(4)(ii) allowing the
State agency to make adjustments to benefits which occur as the result of system
error for "auditable" out-of-balance settlement conditions should
explicitly place the burden of proof on the merchant to prove the appropriate
debit amount. This burden is implicit in the proposed regulation, but should
be made explicit.
2) Contemporaneous Notice Must Be Specific
The contemporaneous notice provided to the recipient of the adjustment must
be explicit in detailing the reasons for the adjustment and the right to a hearing
and immediate re-credit of the adjusted amount. For example, the contemporaneous
notice should include:
1) The date and time of the original transaction that led to the alleged
out-of-balance settlement condition;
2) The name and location of the merchant involved;
3) The amount wrongly debited and the amount which should have been debited;
4) The new balance as the result of the adjustment;
5) The recipient's rights to a hearing, and the immediate re-crediting
of the adjusted amount in the case of a dispute over the incorrect debit.
3) Additional Error Resolution Procedures Needed
We applaud the Department's establishment of a five day time period to resolve
disputes regarding system errors. However, we strongly urge the Department to
develop error resolution procedures for all disputes relating to the delivery
of food stamp benefits electronically. There is a need to develop procedures
with respect to both the adequacy and timeliness of complaint handling. The
proposed regulation takes a small step in that direction by providing at least
that all system errors be corrected within five business days. However, much
more needs to be done.
A. Statement of the problem
It simply is not enough to provide recipients with a toll free phone number
they can call to report problems. The contractors in several states are no
longer even accepting calls made from a pay phone now that the FCC allows pay
phone owners to charge recipients of toll free calls a processing fee, thus
inhibiting recipients’ ability to promptly report errors or problems that may
warrant a lock being placed on further access to the accounts.
Another
problem in many of the state EBT programs is that the core specifications with
respect to the toll free number recipients are to use to report problems call
only for bi-lingual Spanish and English services and do not address the needs
of recipients who are either hearing impaired or speak a language other than
Spanish or English, despite numerous complaints about these problems in currently
operating EBT systems over the years.[3]
We also urge that there be a requirement that recipients calling
to report any problem be provided information such as the name or ID number
of the person taking their call and the control number assigned the call to
serve as proof of the reporting of the problem. Although it appeared in the
past that many federal and state officials agreed there was a need for this
type of protection, there is no evidence that any states have included such
a requirement in their EBT programs.
To the maximum extent possible, once a recipient has succeeded in reporting
the problem, the system should provide for correction of errors resulting in
the loss of benefits to recipients within 24 hours of receipt of a report of
a problem. There must also be an established set of procedures regarding the
specific steps that are to be taken once an initial report of an error or loss
of benefits from the account is received, including the nature of any investigation
of the claim that will be made. For the most part, those receiving needs based
assistance have no financial reserves to fall back on. Therefore, there needs
to be prompt resolution of any problems associated with misdirected or otherwise
missing benefits.
B. Suggested error resolution procedures.
I. Consumer Liability for Unauthorized Transfers
(1) In the case of unauthorized transfer of any funds from an electronic benefit
account, the State shall reimburse the recipient for any loss that occurred prior
to the report of the loss, except that:
(a) No reimbursement shall be made if the State or its contractor
finds recipient fraud; (b) No reimbursement shall be required for losses
if the transfer was initiated with a valid access device and PIN, unless force,
duress, or coercion was involved and the recipient is willing to pursue prosecution
of the person who coerced the transaction.
(2) A recipient of electronic benefit transfers shall have no liability for any
unauthorized transfer of benefits from an account once the recipient has notified
the State and reported that:
(a) the access device and/or the PIN is missing; or
(b) the PIN has been compromised and a new PIN must be assigned; or
(c) the recipient has withdrawn authorization to a person who was previously
authorized by the recipient to use the access device.
(3) A recipient of electronic benefit transfers shall have no liability for
benefits that are missing from an account when the loss of benefits is caused
by system errors, fraud by third parties (such as contractors, merchants, or
hackers), or other circumstances that are beyond the control of the recipient
and the recipient has taken appropriate steps to report such loss.
4) No claim for reimbursement of missing benefits may be denied a recipient
unless the State or its contractor first conducts an investigation regarding
the cause of the missing benefits. If the investigation of the claim cannot
be completed within five business days from the time the recipient reports the
problem, the State or its contractor shall be responsible for provisionally
recrediting the recipient's account in the amount of the alleged error unless
and until such time as the investigator concludes that no such error occurred.
II. Toll-Free Hot Lines
(1): The State, when providing benefits through EBT, shall provide all recipients
with appropriate access to a toll free Customer Service Help Desk hot line.
The hot line shall:
(a) be available to recipients 24 hours a day, 7 days a week, and
365 days a year;
(b) be accessible to persons who are non-English speaking or are hearing
impaired, and persons who are elderly, have physical or mental disabilities,
or are illiterate;
(c) be accessible from any pay phone;
(d) provide callers with a control number and a person's name to use
as verification that a report was made;
(e) be capable of taking immediate action to place a hold on the account
or make other changes where necessary;
(f) provide callers with the option of talking to a representative
as opposed to only a pre-recorded message.
(2) The State shall insure that there is a reporting system which is continually
operative and accessible. Once a household reports that their EBT card has
been lost or stolen, the State or its contractor shall assume liability for
benefits subsequently drawn from the account and replace any lost or stolen
benefits to the household. The State or its contractor shall maintain a record
showing the date and time of all reports by households that their card has been
lost or stolen.
Conclusion
We particularly like the revised rules on re-presentation. The proposal
providing for re-presentation in equal monthly amounts not to exceed the greater
of $10 or 10% of the allotment is an improvement for all Food Stamp recipients
over the current rules. NCLC favors this change for the reasons given in the
proposal, and also because the existing rule, requiring that the first installment
in a re-presentation be $50 is excessive for families who (by virtue of having
qualified for Food Stamp benefits) have an extraordinary need that could be
seriously harmed by a $50 deduction in those benefits all at once.
We also
support the proposal to allow adjustments only under specific limited conditions,
and to require the immediate re-crediting of accounts pending a dispute.
All errors impede the timely posting of accurate account balances. The proposed
regulations appropriately recognize that only actual system malfunctions should
qualify for an exception from advance notice procedures. The proposal also
appropriately recognizes the importance of the recipient’s right to make a timely
appeal and have the disputed adjustments recredited to the account pending the
outcome of the appeal.
National Consumer Law Center, Inc. 1629 K Street, N.W.
Washington, DC 20006
(202) 986-6060 fax (202) 463-9462
Boston
Office:
18 Tremont
St., Suite 400
Boston,
MA 02108
(617)
523-8010
July 24, 1998
Mr. Jeff Cohen
Chief, Electronic Benefit Transfer Branch
Benefit Redemption Division
Food
and Nutrition Service
USDA
3101
Park Center Drive
Alexandria,
Virginia 22302
Re: Proposed Regulations RIN: 0584-AC61
Dear Mr. Cohen:
Enclosed please find comments of the National Consumer Law Center on the proposed
changes to 7 CFR Part 273 and 274 regarding out-of-balance settlements and adjustments.
Karen Walker of your staff kindly permitted us to file these comments a few
days after the deadline.
If you have any questions, please do not hesitate
to contact us. Our Boston office and
Barbara Leyser, our EBT consultant (barbaral@clark.net) were primarily responsible
for writing these comments on behalf of our low income clients. Thank you for
your consideration of these views.
Sincerely,
Margot Saunders
Managing Attorney
1
The National Consumer Law Center is a nonprofit organization specializing in
consumer credit issues on behalf of low-income people. We work with thousands
of legal services, government and private attorneys around the country who request
our assistance with the analysis of financial transactions, in order to determine
appropriate claims and defenses their low-income and elderly clients might have.
2
See Goldberg v. Kelly, 397 U.S. 254 (1970); 45 C.F.R. § 205.10(a)(1);
7 C.F.R. § 273.13(a), §273.15.
3
The Direct Payment Card project in Texas was a model in this area: there was
both a special hot line number for the hearing impaired and the contractor used
the services of international telephone operators as interpreters for any calls
that came into the hot line from recipients speaking a language other than one
for which the contractor had bilingual staff capabilities. In the state EBT
projects, we know that FL, IL, MN, and PA all provide TTY access and that MN
requires access to the AT&T language line to support clients who are non-English
speaking.
and NCLC