FNS-209 reg citation

Food and Nutrition Service, USDA

§ 273.18

readily identify those situations where
a claim against a household can be
used to offset the amount to be restored.
[Amdt. 132, 43 FR 47889, Oct. 17, 1978, as
amended by Amdt. 225, 48 FR 16831, Apr. 19,
1983; Amdt. 314, 54 FR 24518, June 7, 1989;
Amdt. 356, 59 FR 29713, June 9, 1994]

§ 273.18 Claims against households.
(a) General. (1) A recipient claim is an
amount owed because of:
(i) Benefits that are overpaid or
(ii) Benefits that are trafficked. Trafficking is defined in 7 CFR 271.2.
(2) This claim is a Federal debt subject to this and other regulations governing Federal debts. The State agency
must establish and collect any claim
by following these regulations.
(3) As a State agency, you must develop a plan for establishing and col-

lecting claims that provides orderly
claims processing and results in claims
collections similar to recent national
rates of collection. If you do not meet
these standards, you must take corrective action to correct any deficiencies
in the plan.
(4) The following are responsible for
paying a claim:
(i) Each person who was an adult
member of the household when the
overpayment or trafficking occurred;
(ii) A sponsor of an alien household
member if the sponsor is at fault; or
(iii) A person connected to the household, such as an authorized representative, who actually trafficks or otherwise causes an overpayment or trafficking.
(b) Types of claims. There are three
types of claims:

An . . .

is . . .

(1) Intentional Program violation
(IPV) claim.
(2) Inadvertent household error
(IHE) claim.
(3) Agency error (AE) claim ......

any claim for an overpayment or trafficking resulting from an
individual committing an IPV. An IPV is defined in § 273.16.
any claim for an overpayment resulting from a misunderstanding or unintended error on the part of the household.
any claim for an overpayment caused by an action or failure
to take action by the State agency. The only exception is an
overpayment caused by a household transacting an
untampered expired Authorization to Participate (ATP) card.

(c) Calculating the claim amount—(1)
Claims not related to trafficking.
(i) As a State agency, you
must calculate a claim . . .

and . . .

and . . .

back to at least twelve months
prior to when you become
aware of the overpayment.

for an IPV claim, the claim
must be calculated back to
the month the act of IPV
first occurred.

for all claims, don’t include
any amounts that occurred
more than six years before
you became aware of the
overpayment.

(ii) The actual steps for calculating a claim are
you . . .

unless . . .

then . . .

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(A) determine the correct
amount of benefits for each
month that a household received an overpayment.

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§ 273.18

7 CFR Ch. II (1–1–10 Edition)
you . . .

(B) do not apply the earned income deduction to that part
of any earned income that
the household failed to report
in a timely manner when this
act is the basis for the claim.
(C) subtract the correct amount
of benefits from the benefits
actually received. The answer is the amount of the
overpayment.
(D) reduce the overpayment
amount by any EBT benefits
expunged from the household’s EBT benefit account in
accordance with your own
procedures. The difference is
the amount of the claim.

the claim is an AE claim ........

apply the earned income deduction.

this answer is zero or negative.

dispose of the claim referral.

you are not aware of any expunged benefits.

the amount of the overpayment calculated in paragraph (e)(1)(ii)(C) of this
section is the amount of the
claim.

(2) Trafficking-related claims. Claims
arising from trafficking-related offenses will be the value of the trafficked benefits as determined by:
(i) The individual’s admission;

(ii) Adjudication; or
(iii) The documentation that forms
the basis for the trafficking determination.
(d) Claim referral management.

(1) As a State agency, you
must . . .

and you . . .

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establish a claim before the
last day of the quarter following the quarter in which
the overpayment or trafficking incident was discovered.

unless . . .

will ensure that no less than
90 percent of all claim referrals are either established or disposed of according to this time frame.

(2) Instead of using the standard in
paragraph (d)(1) of this section, you
may opt to develop and follow your
own plan for the efficient and effective
management of claim referrals.
(i) This plan must be approved by us.
(ii) At a minimum, this plan must include:
(A) Justification as to why your
standards and procedures will be more
efficient and effective than our claim
referral standard;
(B) Procedures for the detection and
referral of potential overpayments or
trafficking violations;
(C) Time frames and procedures for
tracking claim referrals through date
of discovery to date of establishment;

you develop and use your
own standards and procedures that have been approved by us (see paragraph (d)(2) of this section).

(D) A description of the process to
ensure that these time frames are
being met;
(E) Any special procedures and time
frames for IPV referrals; and
(F) A procedure to track and followup on IPV claim referrals when these
referrals are referred for prosecutorial
or similar action.
(e) Initiating collection action and managing claims—(1) Applicability. State
agencies must begin collection action
on all claims unless the conditions
under paragraph (g)(2) of this section
apply.
(2) Pre-establishment cost effectiveness
determination. A State agency may opt
not to establish and subsequently collect an overpayment that is not cost

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Food and Nutrition Service, USDA

§ 273.18

effective. The following is our cost-effectiveness policy for State agencies:
(i) You may follow your own cost effectiveness plan and
opt not to establish any claim if
. . .
you determine that the claim
referral is not cost effective
to pursue.

unless . . .

or . . .

you do not have a cost-effectiveness plan approved by
us.

you already established the
claim or discovered the
overpayment in a quality
control review.

(ii) Or you may follow the FNS threshold and
opt not to establish any claim if
. . .
you determine that the claim
referral is $125 or less.

unless . . .

the household is currently
you already established the
participating in the Program.
claim or discovered the
overpayment in a quality
control review.

(3) Notification of claim. (i) Each State
agency must develop and mail or otherwise deliver to the household written
notification to begin collection action
on any claim.
(ii) The claim will be considered established for tracking purposes as of
the date of the initial demand letter or
written notification.
(iii) If the claim or the amount of the
claim was not established at a hearing,
the State agency must provide the
household with a one-time notice of adverse action. The notice of adverse action may either be sent separately or
as part of the demand letter.

(D) The time period associated
with the claim.
(E) How the claim was calculated.
(F) The phone number to call for
more information about the
claim.
(G) That, if the claim is not
paid, it will be sent to other collection agencies, who will use
various collection methods to
collect the claim.
(H) The opportunity to inspect
and copy records related to the
claim.

(IV) THE INITIAL DEMAND LETTER
OR NOTICE OF ADVERSE ACTION
MUST INCLUDE LANGUAGE STATING:

(I) Unless the amount of the
claim was established at a hearing, the opportunity for a fair
hearing on the decision related
to the claim. The household will
have 90 days to request a fair
hearing.

(A) The amount of the claim.
(B) The intent to collect from all
adults in the household when the
overpayment occurred.

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or . . .

(C) The type (IPV, IHE, AE or
similar language) and reason for
the claim.

(J) That, if not paid, the claim
will be referred to the Federal
government for federal collection action.

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§ 273.18

7 CFR Ch. II (1–1–10 Edition)

(K) That the household can
make a written agreement to
repay the amount of the claim
prior to it being referred for Federal collection action.
(L) That, if the claim becomes
delinquent, the household may
be subject to additional processing charges.
(M) That the State agency may
reduce any part of the claim if
the agency believes that the
household is not able to repay
the claim.
(N) A due date or time frame to
either repay or make arrangements to repay the claim, unless
the State agency is to impose allotment reduction.

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(O) If allotment reduction is to
be imposed, the percentage to be
used and the effective date.
(v) The due date or time frame for repayment must be not later than 30 days
after the date of the initial written notification or demand letter.
(vi) Subsequent demand letters or notices may be sent at the discretion of
the State agency. The language to be
used and content of these letters is left
up to the State agency.
(4) Repayment agreements. (i) Any repayment agreement for any claim must
contain due dates or time frames for
the periodic submission of payments.
(ii) The agreement must specify that
the household will be subject to involuntary collection action(s) if payment
is not received by the due date and the
claim becomes delinquent.
(5) Determining Delinquency. (i) Unless
specified in paragraph (e)(5)(iv) of this
section, a claim must be considered delinquent if:
(A) The claim has not been paid by
the due date and a satisfactory payment arrangement has not been made;
or
(B) A payment arrangement has been
established and a scheduled payment
has not been made by the due date.

(ii) The date of delinquency for a
claim
covered
under
paragraph
(e)(5)(i)(A) of this section is the due
date on the initial written notification/
demand letter. The claim will remain
delinquent until payment is received in
full, a satisfactory payment agreement
is negotiated, or allotment reduction is
invoked.
(iii) The date of delinquency for a
claim
covered
under
paragraph
(e)(5)(i)(B) of this section is the due
date of the missed installment payment. The claim will remain delinquent until payment is received in full,
allotment reduction is invoked, or if
the State agency determines to either
resume or re-negotiate the repayment
schedule.
(iv) A claim will not be considered
delinquent if another claim for the
same household is currently being paid
either through an installment agreement or allotment reduction and you,
as a State agency, expect to begin collection on the claim once the prior
claim(s) is settled.
(v) A claim is not subject to the requirements for delinquent debts if the
State agency is unable to determine
delinquency status because collection
is coordinated through the court system.
(6) Fair hearings and claims. (i) A
claim awaiting a fair hearing decision
must not be considered delinquent.
(ii) If the hearing official determines
that a claim does, in fact, exist against
the household, the household must be
re-notified of the claim. The language
to be used in this notice is left up to
the State agency. The demand for payment may be combined with the notice
of the hearing decision. Delinquency
must be based on the due date of this
subsequent notice and not on the initial pre-hearing demand letter sent to
the household.
(iii) If the hearing official determines
that a claim does not exist, the claim
is disposed of in accordance with paragraph (e)(8) of this section.
(7) Compromising claims. (i) As a State
agency, you may compromise a claim
or any portion of a claim if it can be
reasonably determined that a household’s economic circumstances dictate
that the claim will not be paid in three
years.

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Food and Nutrition Service, USDA

§ 273.18

(ii) You may use the full amount of
the claim (including any amount compromised) to offset benefits in accordance with § 273.17.
(iii) You may reinstate any compromised portion of a claim if the
claim becomes delinquent.
(8) Terminating and writing-off claims–
(i) A terminated claim is a claim in

which all collection action has ceased.
A written-off claim is no longer considered a receivable subject to continued
Federal and State agency collection
and reporting requirements.
(ii) The following is our claim termination policy:

As a State agency, if . . .

Then you . . .

Unless . . .

(A) you find that the claim is invalid.

must discharge the claim and
reflect the event as a balance adjustment rather
than a termination.

(B) all adult household members die.
(C) the claim balance is $25 or
less and the claim has been
delinquent for 90 days or
more.
(D) you determine it is not cost
effective to pursue the claim
any further.
(E) the claim is delinquent for
three years or more.

must terminate and write-off
the claim.
must terminate and write-off
the claim.

it is appropriate to pursue the
overpayment as a different
type of claim (e.g., as an
IHE rather than an IPV
claim).
you plan to pursue the claim
against the estate.
other claims exist against this
household resulting in an
aggregate claim total of
greater than $25.
we have not approved your
overall cost-effectiveness
criteria.
you plan to continue to pursue the claim through
Treasury’s Offset Program.

(F) you cannot locate the
household.
(G) a new collection method or
a specific event (such as
winning the lottery) substantially increases the likelihood
of further collections.

may terminate and write-off
the claim.
may reinstate a terminated
and written-off claim.

must terminate and write-off
the claim.
must terminate and write-off
the claim.

you decide not to pursue this
option.

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(f) Acceptable forms of payment.
You may collect a claim by:

However . . .

(1) Reducing benefits prior to issuance. This includes allotment reduction and offsets to restored benefits.
(2) Reducing benefits after issuance. These
are benefits from electronic benefit transfer
(EBT) accounts.
(3) Accepting cash or any of its generally accepted equivalents. These equivalents include check, money order, and credit or
debit cards.
(4) Accepting paper food coupons ....................

You must follow the instructions and limits
found in paragraphs (g)(1) and (g)(3) of this
section.
You must follow the instructions and limits
found in paragraph (g)(2) of this section.
You do not have to accept credit or debit
cards if you do not have the capability to accept these payments.
You must destroy any coupons or coupon
books that are not returned to inventory and
document as appropriate.

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§ 273.18

7 CFR Ch. II (1–1–10 Edition)
You may collect a claim by:

However . . .

(5) Conducting your own offsets and intercepts.
This includes but is not limited to wage garnishments and intercepts of various State
payments. These collections are considered
‘‘cash’’ for FNS claim accounting and reporting purposes.
(6) Requiring the household to perform public
service.

You must follow any limits that may apply in
paragraph (g) of this section.

(7) Participating in the Treasury collection programs.

This form of payment must be ordered by a
court and specifically be in lieu of paying
any claim.
You must follow the procedures found in paragraph (n) of this section.

(g) Collection methods—(1) Allotment
reduction. The following is our allotment reduction policy:
As a State agency, you must . . .

Unless . . .

(i) Automatically collect payments for any claim
by reducing the amount of monthly benefits
that a household receives.

the claim is being collected at regular intervals
at a higher amount or another household is
already having its allotment reduced for the
same claim (see paragraph (g)(1)(vi) of this
section).
the household agrees to a higher amount.

(ii) For an IPV claim, limit the amount reduced
to the greater of $20 per month or 20 percent of the household’s monthly allotment or
entitlement.
(iii) For an IHE or AE claim, limit the amount
reduced to the greater of $10 per month or
10 percent of the household’s monthly allotment.
(iv) Not reduce the initial allotment when the
household is first certified.
(v) Not use additional involuntary collection
methods against individuals in a household
that is already having its benefit reduced.

the household agrees to a higher amount.

the household agrees to this reduction.
the additional payment is voluntary; or the
source of the payment is irregular and unexpected such as a State tax refund or lottery
winnings offset.

You may . . .
(vi) Collect using allotment reduction from two separate households for the same claim.
However, you are not required to perform this simultaneous reduction.
(vii) Continue to use any other collection method against any individual who is not a current
member of the household that is undergoing allotment reduction.

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(2) Benefits from EBT accounts. (i) As a
State agency, you must allow a house-

hold to pay its claim using benefits
from its EBT benefit account.
(ii) You must comply with the following EBT benefit claims collection
and adjustment requirements:

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Food and Nutrition Service, USDA

§ 273.18

(A) For collecting from active (or reactivated) EBT benefits . . .
You . . .
need written permission which
may be obtained in advance
and done in accordance
with paragraph (g)(2)(iv) of
this section;.

or . . .
oral permission for one time
reductions with you sending
the household a receipt of
the transaction within 10
days.

and . . .
the retention rules do apply to
this collection.

(B) For collecting from stale EBT benefits . . .
You . . .

and . . .

must mail or otherwise deliver
to the household written notification that you intend to
apply the benefits to the outstanding claim.

give the household at least 10
days to notify you that it
doesn’t want to use these
benefits to pay the claim.

and . . .
the retention rules apply to
this collection.

(C) For making an adjustment with expunged EBT benefits . . .

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You . . .
must adjust the amount of any
claim by subtracting any expunged amount from the
EBT benefit account for
which you become aware.

and . . .
this can be done anytime .......

(iii) A collection from an EBT account must be non-settling against the
benefit drawdown account.
(iv) At a minimum, any written
agreement with the household to collect a claim using active EBT benefits
must include:
(A) A statement that this collection
activity is strictly voluntary;
(B) The amount of the payment;
(C) The frequency of the payments
(i.e., whether monthly or one time
only);
(D) The length (if any) of the agreement; and
(E) A statement that the household
may revoke this agreement at any
time.
(3) Offsets to restored benefits. You
must reduce any restored benefits owed
to a household by the amount of any
outstanding claim. This may be done
at any time during the claim establishment and collection process.
(4) Lump sum payments. You must accept any payment for a claim whether
it represents full or partial payment.
The payment may be in any of the acceptable formats.

and . . .
the retention rules do not
apply to this adjustment.

(5) Installment payments. (i) You may
accept installment payments made for
a claim as part of a negotiated repayment agreement.
(ii) As a household, if you fail to submit a payment in accordance with the
terms of your negotiated repayment
schedule, your claim becomes delinquent and it will be subject to additional collection actions.
(6) Intercept of unemployment compensation benefits. (i) As a State agency,
you may arrange with a liable individual to intercept his or her unemployment compensation benefits for
the collection of any claim. This collection option may be included as part
of a repayment agreement.
(ii) You may also intercept an individual’s unemployment compensation
benefits by obtaining a court order.
(iii) You must report any intercept of
unemployment compensation benefits
as ‘‘cash’’ payments when they are reported to us.
(7) Public service. If authorized by a
court, the value of a claim may be paid
by the household performing public

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§ 273.18

7 CFR Ch. II (1–1–10 Edition)

service. As a State agency, you will report these amounts in accordance with
our instructions.
(8) Other collection actions. You may
employ any other collection actions to
collect claims. These actions include,
but are not limited to, referrals to collection and/or other similar private and
public sector agencies, state tax refund
and lottery offsets, wage garnishments,
property liens and small claims court.
(9) Unspecified joint collections. When
an unspecified joint collection is received for a combined public assistance/food stamp recipient claim, each
program must receive its pro rata
share of the amount collected. An unspecified joint collection is when funds
are received in response to correspondence or a referral that contained both
the food stamp and other program
claim(s) and the debtor does not specify to which claim to apply the collection.
(h) Refunds for overpaid claims. (1) As
a household, if you overpay a claim,
the State agency must provide a refund
for the overpaid amount as soon as possible after the State agency finds out

about the overpayment. You will be
paid by whatever method the State
agency deems appropriate considering
the circumstances.
(2) You are not entitled to a refund if
the overpaid amount is attributed to
an expunged EBT benefit.
(i) Interstate claims collection. (1) Unless a transfer occurs as outlined in
paragraph (i)(2) of this section, as a
State agency, you are responsible for
initiating and continuing collection action on any food stamp recipient claim
regardless of whether the household remains in your State.
(2) You may accept a claim from another State agency if the household
with the claim moves into your State.
Once you accept this responsibility,
the claim is yours for future collection
and reporting. You will report interstate transfers to us in accordance
with our instructions.
(j) Bankruptcy. A State agency may
act on our behalf in any bankruptcy
proceeding against a bankrupt household with outstanding recipient claims.
(k) Retention rates. (1) The retention
rates for State agencies are as follows:
then the retention rate is
. . .

If you collect an . . .

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(i) IPV claim ......................................................................................
(ii) IHE claim .....................................................................................
(iii) IHE claim by reducing a person’s unemployment compensation benefit.
(iv) AE claim .....................................................................................

(2) These rates do not apply to any
reduction in benefits when you disqualify someone for an IPV.
(l) Submission of payments to us. A
State agency must send us the value of
funds collected for IHE, IPV or AE
claims according to our instructions.
We must pay you for claims collection
retention by electronic funds transfer.
(m) Accounting procedures. (1) As a
State agency, you must maintain an
accounting system for monitoring recipient claims against households. This
accounting system shall consist of both
the system of records maintained for
individual debtors and the accounts receivable summary data maintained for
these debts.

35 percent.
20 percent.
35 percent.
nothing.

(2) At a minimum, the accounting
system must document the following
for each claim:
(i) The date of discovery;
(ii) The reason for the claim;
(iii) The calculation of the claim;
(iv) The date you established the
claim;
(v) The methods used to collect the
claim;
(vi) The amount and incidence of any
claim processing charges;
(vii) The reason for the final disposition of the claim;
(viii) Any collections made on the
claim;

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erowe on DSK5CLS3C1PROD with CFR

Food and Nutrition Service, USDA

§ 273.18

(ix) Any correspondence, including
follow-up letters, sent to the household.
(3) At a minimum, your accounting
or certification system must also identify the following for each claim:
(i) Those households whose claims
have become delinquent;
(ii) Those situations in which an
amount not yet restored to a household
can be used to offset a claim owed by
the household; and
(iii) Those households with outstanding claims that are applying for
benefits.
(4) When requested and at intervals
determined by us, your accounting system must also produce:
(i) Accurate and supported outstanding balances and collections for
established claims; and
(ii) Summary reports of the funds
collected, the amount submitted to
FNS, the claims established and terminated, any delinquent claims processing charges, the uncollected balance
and the delinquency of the unpaid debt.
(5) On a quarterly basis, unless otherwise directed by us, your accounting
system must reconcile summary balances reported to individual supporting
records.
(n) Treasury’s Offset Programs (TOP)—
(1) Referring debts to TOP. (i) As a State
agency, you must refer to TOP all recipient claims that are delinquent for
180 or more days.
(ii) You must certify that all of these
claims to be referred to TOP are 180
days delinquent and legally enforceable.
(iii) You must refer these claims in
accordance with our and the Department of the Treasury’s (Treasury) instructions.
(iv) You must not refer claims to
TOP that:
(A) You become aware that the debtor is a member of a participating
household that is having its allotment
reduced to collect the claim; or
(B) Fall into any other category designated by us as non-referable to TOP.
(2) Notifying debtors of referral to TOP.
(i) As a State agency, you must notify
the debtor of the impending referral to
TOP according to our instructions relating to:

(A) What constitutes an adequate address to send the notice;
(B) What specific language will be included in the TOP referral notice;
(C) What will be the appropriate time
frames and appeal rights; and
(D) Any other information that we
determine necessary to fulfill all due
process and other legal requirements as
well as to adequately inform the debtor
of the impending action.
(ii) You must also follow our instructions regarding procedures connected
with responding to inquiries, subsequent reviews and hearings, and any
other procedures determined by us as
necessary in the debtor notification
process.
(3) Effect on debtors. (i) If you, as a
debtor, have your claim referred to
TOP, any eligible Federal payment
that you are owed may be intercepted
through TOP.
(ii) You may also be responsible for
paying any collection or processing
fees charged by the Federal government to intercept your payment.
(4) Procedures when a claim is in TOP.
(i) As a State agency, you must follow
FNS and Treasury procedures when the
claim is in TOP.
(ii) You must remove a claim from
TOP if:
(A) FNS or Treasury instruct you to
remove the debt; or
(B) You discover that:
(1) The debtor is a member of a food
stamp household undergoing allotment
reduction;
(2) The claim is paid up;
(3) The claim is disposed of through a
hearing, termination, compromise or
any other means;
(4) The claim was referred to TOP in
error; or
(5) You make an arrangement with
the debtor to resume payments.
(5) Receiving and reporting. As a State
agency, you must follow our procedures on receiving and reporting TOP
payments.
(6) Security or confidentiality agreements. As a State agency, you must follow our procedures regarding any security or confidentiality agreements or
processes necessary for TOP participation.
[Amdt. 389, 66 FR 41775, July 6, 2000; 65 FR
47587, Aug. 2, 2000]

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