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655 15TH ST, NW, SUITE 700 WASHINGTON, DC 20005 TELEPHONE: 202/452-8444 FAX: 202/429-4519 |
July 26, 1999
Mr. Jeffrey N. Cohen
Chief, Electronic Benefit Transfer Branch
Food and Nutrition Service
U.S. Department of Agriculture
3101 Park Center Drive
Alexandria, Virginia 22302
Dear Mr. Cohen,
The Food Marketing Institute (FMI) respectfully submits the following comments on the Food and Nutrition Service's (FNS's) proposed rule to implement the electronic benefit transfer (EBT) provisions of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) with respect to the Food Stamp Program (FSP). 64 Fed. Reg. 28763 (May 27, 1999). Please consider our comments favorably and include them in the formal record of the FNS proceeding.
FMI is a non-profit association that conducts programs in research, education, industry relations and public affairs on behalf of its 1,500 members and their subsidiaries. Our membership includes food retailers and wholesalers, as well as their customers, in the United States and around the world. FMI's domestic member companies operate approximately 21,000 retail food stores with a combined annual sales volume of $220 billion, which accounts for more than half of all grocery sales in the United States. FMI's retail membership is composed of large multi-store chains, small regional firms, and independent supermarkets. Our international membership includes 200 members from 60 countries.
FMI supports FNS's intention to implement the EBT provisions of the PRWORA. However, as discussed more fully below, we recommend that several modifications be made to the proposal to facilitate the successful implementation of the EBT provisions. Moreover, to ensure the implementation of an effective and efficient national system, we recommend that FNS amend its regulations to require system interoperability rather than system compatibility. The benefits of interoperability serve as a touchstone for several of the comments on the technical aspects of the proposed rule that are discussed below.
The PRWORA requires that each State agency implement EBT for issuance of food stamp benefits no later than October 1, 2002. FMI fully supports the goal of implementing EBT for food stamp benefits as quickly as possible. However, in light of computer problems forecast for January 1, 2000 and the first several months of the year 2000, as well as the need to ensure that all computer systems in food retail stores are fully operational at the turn of the century, no implementations or changes to the system should take effect between October 1, 1999 and the first quarter of the year 2000.
FNS's notice proposes to amend the regulations to allow for the use of off-line EBT systems. As industry standards for off-line electronic payment systems are still evolving, FNS has not proposed standards specific to off-line systems in the rulemaking, but rather requests public comment on future standards for off-line systems.
We believe the opposite approach should be taken: that is, national uniform standards must be developed before off-line systems can be implemented. Several expert, standard-setting bodies, such as the American National Standards Institute (ANSI), the National Automated Clearing House Association (NACHA), and the International Organization for Standardization (ISO), are currently developing standards for off-line EBT systems. Until these standards are developed, off-line technology should not be authorized for use in the FSP.
FNS notes in the preamble to the proposal that the Agency will monitor the experience gained in off-line demonstration projects in Ohio and Wyoming. The Ohio off-line system is not interoperable with surrounding states. Thus, a key lesson to be learned from this trial is that the implementation of off-line technology before national standards are developed will isolate the state using the technology, thereby effectively preventing a harmonized system that will allow citizens to redeem their federally authorized benefits at the location of their choice.
Moreover, the variety of off-line technology that is currently available also recommends that the federal government establish a single standard before off-line technology is used. Since different technologies may require different card readers, food retailers may need to install an array of readers at every checkout stand if a variety of off-line technologies are permitted for food stamp EBT programs. This result would be confusing for benefits recipients and retailers.
Furthermore, to the extent that new technology is necessary to implement the government's EBT program for administering federal benefits to those in need, food retailers should not be responsible for bearing the costs of that technology. Rather, the substantial cost savings realized by the government in the switch from paper to electronic benefits will be more than sufficient to cover the costs in this regard. (See discussion in Section A.5., below.)
Under the PRWORA, state agencies are now permitted to collect a fee for replacing an EBT card by reducing the monthly allotment of the household receiving the replacement card. Although the particulars for EBT card replacement are now left to the states to decide, FMI recommends that FNS require states to provide one free replacement card per year. Such a requirement would be consistent with the standard practice of credit card companies who have recognized that the magnetic stripe on the card may well become worn or poorly functioning due to no fault or misuse on the part of the card holder.
The PRWORA allows State agencies to require that EBT cards contain a photograph of one or more members of a household and requires states to develop procedures to ensure that all appropriate household members or authorized representatives are able to access benefits from the account as necessary.
The current system for ensuring the security of benefits maintained on an EBT card relies on the use of personal identification numbers. PIN numbers are a widely accepted and well-recognized means of ensuring the security of not just EBT cards, but also automated teller machine (ATM) cards. In the case of the EBT card for FSP benefits, the PIN number also properly ensures that the responsibility for correctly utilizing the card rests with the FSP participant and the agencies responsible for administering the program.
Photographs on EBT cards are likely to cause confusion for food retailers in light of the number of people who may be authorized to use any given card, e.g., household members as well as any number of "authorized representatives." Not only will it be virtually impossible for a recipient to determine (and thus, obtain pictures of) all potentially authorized representatives in advance so that they may be depicted on the card, the pictures will be confusing, if not effectively worthless, unless each is large enough to provide an effective likeness of the person and new cards are routinely issued with current photographs. Moreover, the use of photographs effectively and inappropriately attempts to shift the burden for ensuring the correct utilization of the benefits card to the food retailer.
Accordingly, to ensure the maximum security of the benefits and to ensure that the responsibility of maintaining the proper use of the system rests with the agencies responsible for administering the program, we recommend that FNS amend proposed Section 274.12(h)(6) to require that one of the procedures the states must include to ensure access of all household members and authorized representatives to the FSP benefits on EBT cards is a PIN number.
As the FNS notice states, the PRWORA reported the "sense of Congress" that States operate EBT systems in a manner that is "compatible" with one another. Since the current regulations already require system compatibility, the FNS proposal does not include any prospective changes to the regulations in this regard. The notice continues by mentioning various steps that FNS has taken to further the goal of compatibility, including a specification for a standard point of service (POS)/EBT system interface, the use of third party processors, and FNS's work with NACHA.
Although FMI appreciates FNS's activities in this regard, we urge FNS to replace its current compatibility standard with a standard of interoperability. Although these terms at first seem synonymous, they clearly have different meanings. Compatibility ensures a minimum relationship between two or more things, while interoperability specifically addresses the ability of two or more systems to work together or to inter-relate.
The current "compatibility" standard rests on a non-binding "sense of Congress." The legislative history orders that, "EBT standards must . . . permit interstate operation . . .," a goal more akin to interoperability. Thus, FNS might reasonably attend to the direction of Congress by replacing the current system compatibility standard with an interoperability standard through the rulemaking process.
Moreover, the costs to implement an interoperable system are negligible compared to the costs saved in shifting to the EBT system. Indeed, the interim results of a study sponsored by NACHA demonstrate that it would cost only $500,000 to implement interstate access to electronic food stamp benefits. According to the FNS, shifting to the EBT system will save the cost of printing, shipping and ultimately destroying paper food stamp coupons; the FNS determined that these costs totaled $45 million in 1997.
FMI supports the efficient implementation of the EBT provisions of the PRWORA. However, implementation should not occur in the critical months surrounding January 1, 2000. Moreover, off-line technology should not be permitted until national standards have been developed and are widely available. FNS should consider requiring the annual replacement of cards without a charge to participants and the security of food stamp benefits should be ensured with PIN numbers, rather than photographs. Finally, but perhaps most importantly, FNS should replace its current system compatibility standard with a standard of interoperability to ensure a nationally consistent system that will allow FSP participants to access benefits throughout the country.
* * *
We appreciate the opportunity to provide our comments on the FNS's proposal to implement the EBT provisions of the PRWORA. Please do not hesitate to contact us if you have any questions regarding our recommendations.
Sincerely,
Tim Hammonds
President and CEO