NACS Advocates for Retailers Fighting SNAP Fraud Charges

NACS objects to a proposed rule that would hinder retailers from obtaining information needed to defend against fraud allegations.

April 26, 2019

ALEXANDRIA, Va.—NACS submitted comments Monday to the Food and Nutrition Service (FNS) objecting to a proposed rule that would separate the Freedom of Information Act (FOIA) process from the administrative action process against retailers who participate in the Supplemental Nutrition Assistance Program (SNAP) and are accused of fraud or trafficking.

If FNS—the agency that administers SNAP—believes a retailer has violated SNAP rules, FNS starts the sanction process by first issuing a charge letter, giving retailers 10 days to respond. The regulations require that the charge letter specify the violations or actions which would disqualify the retailer from the program or require a civil penalty. In reality, though, the charge letters do not provide meaningful information about the alleged violation(s). FNS merely provides the terminal number, date, time, last four digits of the household EBT number and the transaction amount. FNS fails to provide detailed transaction data describing the types of purchase made; such data are crucial for retailers to refute the supposed violation and prove a transaction was legitimate.

Retailers accused of SNAP violations by FNS use FOIA requests to find out why and for what they are being charged. Under FOIA, the government is generally required to release select information to the public when a FOIA request is filed. Without this detailed evidence of allegedly fraudulent transactions, retailers can’t effectively respond to and address supposed violations.

FNS contends that FOIA requests allow retailers to delay sanctions, which could include a civil monetary penalty or permanent disqualification, since filing an FOIA request puts any administrative action on hold, allowing the retailer to continue to redeem SNAP benefits. The agency’s proposed rule is meant to prevent these tactics by separating the FOIA process from the administrative action in an effort to expedite enforcement. Due to limited resources, FNS often can’t respond to FOIA requests in a timely manner, even though federal agencies are required to respond to FOIA requests within 20 business days.

In the proposed rule, FNS assumes that retailers are delaying the administrative actions by submitting FOIA requests, but they are in fact merely trying to get information they need—which the agency fails to provide—to understand the alleged actions that may disqualify them from the program or make them liable for monetary fines. While the law encourages the removal of violating firms in a timely manner, the law also provides private businesses with a right to access information held by the government via the FOIA process.

NACS supports the agency’s work to combat fraud in SNAP and remove bad actors from the program. But the proposed rule to separate FOIA requests from the administrative action process would remove retailers’ rights to due process. It could lead to responsible retailers, who have not violated SNAP rules, losing their ability to redeem SNAP benefits—and SNAP families losing the store they relied upon for convenient access to food. Congress created SNAP to provide hungry Americans with access to food, and retailers are critical partners in the program.

“If FNS is concerned about the time delays in the administrative action process, it should focus on expediting FOIA requests, not removing the only tool by which retailers can obtain information,” NACS told the agency.

NACS also noted that the majority of charge letters are triggered by the agency’s fraud algorithm, so detailed evidence of fraud doesn’t exist. The Anti-fraud Locator using EBT Retailer Transactions (ALERT) system tracks transactions to identify so-called patterns that FNS believes indicate fraud in SNAP. The agency does not publicly disclose the considerations or factors that trigger the algorithm. A report by the Government Accountability Office (GAO) found that the ALERT system unfairly targets smaller retailers, including many NACS members. According to GAO, the agency doesn’t “include large stores” on the list of stores that it monitors for fraud because they have “antifraud measures in place.”

NACS was joined in its letter to FNS by the Society of Independent Gasoline Marketers of America (SIGMA).

Convenience stores provide essential access to nutrition for low-income Americans who live in rural or urban areas. Out of the 153,237 convenience stores in the United States, more than 119,000 participate in SNAP, representing about 45% of all retail outlets authorized to accept SNAP benefits. Convenience stores are often the only establishments easily accessible by walking or public transportation, or the only food retail locations open for business with extended or 24-hour service.