Proposed Rule2026-21658
Supplemental Nutrition Assistance Program: Electronic Benefits Transfer Card Security Measures
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
October 23, 2026
Issuing agencies
Agriculture DepartmentFood and Nutrition Administration
Abstract
The Food and Nutrition Administration (FNA or the Agency), an agency of the U.S. Department of Agriculture (USDA or the Department), is issuing a rule proposing changes to Supplemental Nutrition Assistance Program (SNAP, the Program) regulations to modernize Electronic Benefit Transfer (EBT) technology and align EBT with consumer payment processing industry standards, improving both Program integrity and convenience for SNAP clients. These proposed changes will protect SNAP benefits from thieves and ensure benefits are accessible by approved households.
Full Text
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[Federal Register Volume 91, Number 204 (Friday, October 23, 2026)]
[Proposed Rules]
[Pages 66958-66997]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-21658]
[[Page 66957]]
Vol. 91
Friday,
No. 204
October 23, 2026
Part II
Department of Agriculture
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Food and Nutrition Administration
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7 CFR Parts 271, 274 and 278
Supplemental Nutrition Assistance Program: Electronic Benefits Transfer
Card Security Measures; Proposed Rule
Federal Register / Vol. 91, No. 204 / Friday, October 23, 2026 /
Proposed Rules
[[Page 66958]]
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DEPARTMENT OF AGRICULTURE
Food and Nutrition Administration
7 CFR Parts 271, 274 and 278
[FNS-2025-0137]
RIN 0584-AE99
Supplemental Nutrition Assistance Program: Electronic Benefits
Transfer Card Security Measures
AGENCY: Food and Nutrition Administration (FNA), USDA.
ACTION: Proposed rule.
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SUMMARY: The Food and Nutrition Administration (FNA or the Agency), an
agency of the U.S. Department of Agriculture (USDA or the Department),
is issuing a rule proposing changes to Supplemental Nutrition
Assistance Program (SNAP, the Program) regulations to modernize
Electronic Benefit Transfer (EBT) technology and align EBT with
consumer payment processing industry standards, improving both Program
integrity and convenience for SNAP clients. These proposed changes will
protect SNAP benefits from thieves and ensure benefits are accessible
by approved households.
DATES: Written comments must be received on or before December 22, 2026
to be assured of consideration.
ADDRESSES: The Food and Nutrition Administration, USDA, invites
interested persons to submit written comments on this proposed rule.
Comments may be submitted in writing by one of the following methods:
--Federal eRulemaking Portal: Go to <a href="http://www.regulations.gov">http://www.regulations.gov</a>. Follow
the online instructions for submitting comments.
--Email: Send comments to <a href="/cdn-cgi/l/email-protection#2f7c62016961017c616e7f01665c5c5a4e414c4a017f4043464c566f5a5c4b4e01484059"><span class="__cf_email__" data-cfemail="f5a6b8dbb3bbdba6bbb4a5dbbc868680949b9690dba59a999c968cb580869194db929a83">[email protected]</span></a>. Include
``Supplemental Nutrition Assistance Program: Electronic Benefits
Transfer Card Security Measures'' in the subject line of the message.
--Mail: Send comments to Food and Nutrition Administration, SNAP
Innovation Policy and Issuance Division, Issuance Support Branch, 5601
Sunnyside Ave., Beltsville, MD 20705.
--All written comments submitted in response to this proposed rule will
be included in the record and will be made available to the public.
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. FNA will make the written comments, as well as a
summary of this proposed rule in accordance with 5 U.S.C. 553(b)(4),
publicly available on the internet via <a href="http://www.regulations.gov">http://www.regulations.gov</a>.
FOR FURTHER INFORMATION CONTACT: Erica Kain, Food and Nutrition
Administration, Innovation Policy and Issuance Division, Issuance
Support Branch, <a href="/cdn-cgi/l/email-protection#eebda3c0a8a0c0bda0afbec0a79d9d9b8f808d8bc0be8182878d97ae9b9d8a8fc0898198"><span class="__cf_email__" data-cfemail="91c2dcbfd7dfbfc2dfd0c1bfd8e2e2e4f0fff2f4bfc1fefdf8f2e8d1e4e2f5f0bff6fee7">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
Acronyms, Abbreviations, and Definitions
CSC--Card Security Code. A numeric code printed on a payment card by
the issuer used to verify possession of the physical card. May also
be known as a Card Verification Value (CVV), Card Validation Code
(CVC), Card Authentication Value (CAV), or by other similar terms.
EBT--Electronic Benefit(s) Transfer. An electronic system allowing
the issuance of benefits via payment cards.
EBT Host Processor--The vendor contracted by a State to operate the
State's central EBT database.
EMV--Europay, Mastercard, and VISA. A payment standard in the
consumer payment industry for payment cards with an integrated
electronic circuit chip and the terminals which accept them.
FNA/the Agency--Food and Nutrition Administration. The Federal
agency with oversight over the Supplemental Nutrition Assistance
Program.
IVR--Interactive Voice Response. A technology allowing automated
customer service interactions to take place over a telephone call.
NFC--Near Field Communication. Protocols which enable wireless
communication over short distances for payment cards and their
terminals, also known as `tap-to-pay' or contactless payment.
PAN--Primary Account Number, commonly found on payment cards.
PII--Personally Identifiable Information. Any representation of
information that permits the identity of an individual to whom the
information applies to be reasonably inferred by either direct or
indirect means.
PIN--Personal Identification Number. In SNAP, a user-selected
numeric passcode used for authentication purposes.
POS--Point-of-Sale--the point where a retail transaction is
processed and payments from customers are accepted.
SNAP--Supplemental Nutrition Assistance Program
The Act--The Food and Nutrition Act of 2008, as amended.
TPP--Third-party Processor--within the context of SNAP, a business
entity serving as host processor that facilitates enabling a
retailer to accept EBT payments
USDA/the Department--The United States Department of Agriculture
WIC--Special Supplemental Nutrition Program for Women, Infants, and
Children
Background
SNAP is the largest domestic nutrition assistance program in the
United States. In fiscal year 2025, around 42 million low-income
individuals received SNAP benefits in an average month to help meet
their food needs.
Since 2004, all States have exclusively used EBT cards, which
operate similarly to a debit card, to deliver SNAP benefits to
households. Most States completed the transition from the paper coupons
previously used to EBT cards in the 1990s. At the time of transition,
payment cards with magnetic stripes were the predominant form of
electronic payment technology in the consumer payment industry.
Accordingly, as States transitioned to EBT, payment cards with magnetic
stripes were the standard used for EBT as well.
As payment technology has evolved in the years since the universal
implementation of EBT, EBT cards utilizing magnetic stripes have fallen
behind newer consumer payment methods in terms of security, placing
household SNAP benefits at risk. Most EBT systems currently lack
security elements common in the consumer payment industry and lag
behind in terms of customer experience features as well. The Department
employed commercial standards that were in place when EBT was initially
rolled out. However, due to evolving consumer payment methods and
increased security risks and the Congressional directive to issue
proposed rulemaking, the Department must update and modernize those
standards to maintain ongoing alignment with the current commercial
marketplace.
Through this rule, the Department proposes changes to SNAP with the
goal of improving EBT card security, as well as aligning the SNAP
client experience to consumer payment processing industry standards,
improving both Program integrity and convenience for SNAP clients who
depend on the benefits provided to feed their families.
Authority
Section 11 of the Food and Nutrition Act of 2008, as amended (`the
Act'), establishes the responsibility of State agencies for issuing
benefits via EBT. Section 7(h)(2) of the Act authorizes the USDA to
establish and revise standards for EBT issuance.
Section 501(a) Title IV within Division HH of the Consolidated
Appropriations Act, 2023, Public Law 117-328, requires that the
Secretary promulgate regulations through notice-and-comment rulemaking
to require
[[Page 66959]]
State SNAP agencies to take security measures in detecting and
preventing the theft of benefits, including through card skimming, card
cloning, and other similar fraudulent methods.
Summary of EBT Technology
Federal regulations at 7 CFR part 271.2 currently define EBT cards
as a method for SNAP households to access the EBT system and their SNAP
benefits, including via an online magnetic stripe card (requiring
connectivity to a central EBT database), an offline smart card (where
benefit balances are tracked individually on the EBT cards themselves),
a chip card, a contactless digital wallet with a stored card, or any
other similar benefit access technology approved by FNA.
However, all agencies operating SNAP have continued to issue
benefits via the same payment method used since the transition from
paper coupons: EBT cards with magnetic stripes, secured using Personal
Identification Numbers (PINs).
Regulations require that households who participate in SNAP be able
to use their cards at any FNA-approved SNAP retailer throughout the
United States. Each SNAP transaction involves a series of steps and
partners that exchange data.
When EBT cards with magnetic stripes are used, the point-of-sale
(POS) terminals operated by SNAP retailers read the data stored on the
magnetic stripe and send the transaction information, frequently routed
by a third-party processor (TPP) via an EBT gateway, to the card-
issuing State's EBT host processor, who is responsible for the
operation of the central EBT database and tracking SNAP benefit
balances for the State. The EBT host processor responsible for the
central EBT database containing the benefits subsequently determines if
the transaction is approved or denied and routes the response back to
the POS terminal.
In addition to SNAP, several other benefit programs including
Summer EBT and Temporary Assistance for Needy Families (TANF) are
issued on EBT cards. State agencies may provide these benefits on the
same EBT card as SNAP or separate EBT cards. In cases where States
issue other benefits on the same EBT card as SNAP, those benefits would
also be protected by the security improvements proposed in this rule.
Although separately issued EBT cards are subject to the same security
weaknesses that affect SNAP, they would not be required to comply with
the standards proposed in this rule. Regulations for other EBT programs
are distinct from SNAP regulations, and changes to requirements for
those programs would be promulgated in a separate rulemaking process.
Benefit Theft and Card Security
SNAP benefit theft is a direct threat to the health and well-being
of SNAP participants, denying them access to food that they may not
otherwise have the financial means to purchase. Ensuring the integrity
of SNAP benefits is necessary so that clients can shop for food with
confidence in the EBT system and to ensure that benefits are reserved
only for eligible SNAP households. Further, fraudulent EBT schemes also
constitute the theft of hard-earned, American tax dollars. Under its
oversight of SNAP, the Department is responsible for ensuring EBT
systems prevent fraud, waste, and abuse of funds.
Historically, it was preferable for bad actors to pursue the cash
obtained from credit/debit cards versus the SNAP benefits obtained from
EBT cards. Over the last decade, the changing technology used by the
consumer payment industry has strengthened protections against credit/
debit card theft, yet SNAP continues to rely on magnetic stripes
secured only by PINs as the primary means of conducting transactions.
Now that credit/debit cards have significantly increased protections
and primarily rely on chip and NFC transactions, experienced criminals
have turned their attention to EBT cards and implemented the same
techniques previously used against credit/debit cardholders. This
leaves SNAP participants increasingly vulnerable to benefit theft,
potentially forcing them to spend money already budgeted for other
necessities on food.
Magnetic stripes as a technology for conducting transactions are
inherently vulnerable, as many techniques have been developed that
exploit known vulnerabilities. Bad actors may attach devices to POS
terminals that can intercept card data to easily access information
that is encoded on the magnetic stripe of the EBT card (``card
skimming''), such as the Primary Account Number (PAN). PINs can be
obtained or guessed by a variety of methods including interception
methods, hidden cameras, algorithmic attacks, customer service
interactive voice response (IVR) vulnerabilities, and phishing attacks
where SNAP clients are deceived into unwittingly divulging PIN
information.
In the past, when complete card information was obtained, bad
actors still had challenges obtaining equipment that could then write
the stolen card information onto a new card (``card cloning''). Due to
the cost of complex electronics decreasing over time, card cloning
equipment is now more affordable and easily accessible. This has
minimized the barrier for bad actors to clone cards and use benefits
stolen from the original SNAP benefit account involved.
Additionally, bad actors exploited the expansion of SNAP online
shopping as another route to spend fraudulently obtained EBT card
information. During the COVID-19 pandemic, the USDA expedited
nationwide participation in the previously existing SNAP Online
Purchasing Pilot. To help SNAP clients make purchases of food while
remaining safely isolated, clients in all States could enter their EBT
card number and PIN to make online purchases from authorized SNAP
retailers offering pick-up or delivery of SNAP-eligible products. Post-
pandemic, SNAP online purchasing continues to be available nationwide.
If proper security measures are not implemented in these online
purchasing systems, algorithmic attacks can be used by bad actors to
attempt large numbers of transactions with varying inputs until they
succeed. For example, there is often significant vulnerability to
`soft' PINs that may be easily guessed, such as common number sequences
(``1234''), or repeating numbers (``1111'').
With this proposed rule, the Department looks to address some of
the common vulnerabilities inherent to the transaction technologies
currently used in EBT systems by bringing EBT in alignment with the
consumer credit/debit industry. The Department intends to take
advantage of existing strategies and technologies known to be effective
in detecting and preventing theft of SNAP benefits through card
skimming, card cloning, and other similar electronic fraudulent
methods, with the goal of ensuring the integrity of SNAP benefit
issuances.
Availability of Data
Although EBT fraud and benefit theft has attracted national
attention in recent years, the Department does not have data that can
conclusively and accurately track long-term historical levels of EBT
benefit theft perpetrated via electronic methods such as card skimming
and card cloning, as historically there were no requirements for States
to provide data on EBT fraud.
The Consolidated Appropriations Act, 2023 included time-limited
requirements for States to provide FNA with statistical reports on such
theft and implement plans to replace stolen SNAP benefits with Federal
funds. The data provided by States pursuant to this requirement
(starting in Federal Fiscal
[[Page 66960]]
Year 2023) on the volume of stolen SNAP benefits replaced can be viewed
online at: <a href="https://www.fna.usda.gov/data-research/data-visualization/snap-replacement-stolen-benefits-dashboard">https://www.fna.usda.gov/data-research/data-visualization/snap-replacement-stolen-benefits-dashboard</a>, and provides FNA and the
public with limited insight into the scale and patterns of EBT benefit
theft. However, the authority provided by the Consolidated
Appropriations Act, 2023 for replacement of stolen SNAP benefits with
Federal funds expired on December 20, 2024, so States are once again no
longer required to report EBT fraud statistics to the Department. As of
the second quarter of Federal Fiscal Year 2025, 753,929 claims for
replacement of stolen SNAP benefits have been approved across the
nation, with a total replacement value of $360,441,561. A limited
number of retroactive claims and associated replacements are expected
as States sunset their replacement process. Further, these data only
reflect fraudulent transactions for which SNAP households filed claims
to replace their benefits during this period and may not capture the
full scope of benefit theft during this period.
While the lack of retrospective data makes it difficult to assess
historical rates of EBT benefit theft, analysis of publicly available
reporting on the topic points strongly to a significant increase in
reports of benefit theft to State agencies starting in recent years.
Information Access for Benefit Integrity
Beyond the deficiencies with the transaction method itself, SNAP
EBT also frequently lags the consumer payment industry in features
available to clients to monitor and secure their benefits. Some
existing EBT systems do not make available comprehensive transaction
information including the name of the retailer involved. The
availability of user-selectable account security options (such as
benefit account freezing or blocking of purchases of specific types or
in specific locations) also varies widely from State to State.
Ensuring all SNAP clients in every State are fully aware of the
details of purchases being made with their account helps to strengthen
benefit integrity and enhance the customer experience. Giving SNAP
clients access to enhanced account features, many of which are common
in the consumer payment industry, will enable them to control how their
benefits can be spent and help avoid EBT fraud. SNAP clients must be
able to activate and deactivate these accounts freely via online
cardholder portal systems, or mobile account information applications,
as well as by contacting their local State office via telephone or
visiting in person. Offering multiple customer service channels is
critical for all services offered to ensure that the disparate needs of
SNAP clients are met, including disabled clients or clients with
limited internet or mobile phone access.
With these changes, this proposed rule intends to improve the
general customer experience of SNAP clients as they purchase food via
EBT by giving them greater control and understanding of their benefit
account.
Listening Sessions
In 2023, the Department prepared for this proposed rule by
conducting 16 listening sessions focused on the migration to EBT cards
with electronic chip and NFC payment technology with partners from the
SNAP industry, such as: EBT host processors, third-party processors,
retailers and retailer associations, anti-hunger advocates, equipment
manufacturers, and State agencies. The Department continues to engage
with these partners with additional listening sessions facilitated
through the USDA EBT Card Industry Forum hosted by the Accredited
Standards Committee X9. The Accredited Standards Committee X9 is the
American National Standards Institute (ANSI)-accredited standards
developing organization that sets standards for exchanging EBT
financial transaction messages. Beginning in June 2023, the X9 EBT Card
Industry Forum was created, consisting of FNA, State agencies, EBT host
processors, third-party payment processors, retailers, point-of-sale
providers, the branded card networks, and mobile payment processors.
All partners involved in the Forum agreed on the establishment of
national standards for mobile payment and electronic chip card
technologies to be used in EBT. After an extensive public notice and
comment process, the updated EBT standard was officially ratified and
published \1\ by ANSI in August 2024.
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\1\ The published standard is available on the American National
Standards Institute (ANSI) Notice of Proposed Rulemaking (NPRM)
Review Area. ANSI NPRM Review Area's landing page is accessible at
<a href="https://www.surveymonkey.com/r/DQVJYMK">https://www.surveymonkey.com/r/DQVJYMK</a>.
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Guidance
In October 2022, the Department issued guidance titled
``Supplemental Nutrition Assistance Program (SNAP) and Temporary
Assistance for Needy Families (TANF) Electronic Benefit Transfer (EBT)
Card Skimming Prevention--Tools and Resources'' with the intent to
educate State SNAP agencies on known forms of benefit theft and
recommended prevention tactics.\2\ The Department issued this guidance
in response to increasing reports of benefit theft from State SNAP
agencies. In March 2023, the Department issued guidance titled
``Addressing Stolen SNAP Benefits'' to SNAP participants, State SNAP
agencies, and SNAP retailers additional regarding best practices to
combat benefit theft.\3\
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\2\ <a href="https://www.FNA.usda.gov/snap/snap-tanf-ebt-card-skimming-prevention">https://www.FNA.usda.gov/snap/snap-tanf-ebt-card-skimming-prevention</a>.
\3\ <a href="https://www.FNA.usda.gov/snap/stolen-benefits">https://www.FNA.usda.gov/snap/stolen-benefits</a>.
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In the creation of this rule, the Department has considered
effectiveness against benefit theft and consistency with consumer
payment industry standards, as well as the cost of the requirements to
be imposed on parties involved with implementing the EBT changes.
With this proposed rule, the Department seeks comments from the
public regarding the potential changes to EBT. The Department will
discuss each of the proposed regulatory changes in more detail below.
Discussion of Proposed Rule
SNAP EBT Operating Standards
The Department currently does not utilize any type of operating
standards for SNAP EBT-related purposes. As a result, when payment
technology that enhances security evolves in the consumer payment
industry, the Department is unable to enforce integration of such
technology into EBT due to the time constraints of the regulatory
process. Financial pressures and lack of updated Federal standards may
also cause State SNAP agencies to delay or avoid EBT system
enhancements.
The Department proposes the creation and adoption of a set of SNAP
EBT Operating Standards into regulation to address these issues. These
standards will be found at Appendix A to Part 274--Supplemental
Nutrition Assistance Program Electronic Benefit Transfer Operating
Standards. This document establishes technical operating standards to
be utilized by State agencies (and the contracted vendors acting on
their behalf) in their operation of SNAP and EBT payment methods and
supplement the regulatory requirements found in 7 CFR 274. The SNAP EBT
Operating Standards define a variety of mandatory and optional features
for State agencies to implement within their EBT systems and payment
methods. Some of the elements covered within the SNAP EBT Operating
Standards include transaction
[[Page 66961]]
processing, documentation, reporting, and system requirements.
The SNAP EBT Operating Standards, in conjunction with the proposed
regulatory changes, have the following key objectives:
--Aligning SNAP closer to consumer payment (credit and debit) industry
practices
--Ensuring responsiveness to future industry developments
--Reduction of benefit theft targeting SNAP clients
--Increased informational awareness and confidence for clients
regarding their SNAP benefit accounts
--Improved SNAP customer experience
--Improved FNA oversight of new EBT implementation projects, database
conversions, and system testing
--Enhanced data availability and accuracy for key Program metrics
Along with these key objectives, the SNAP EBT Operating Standards
will specifically provide guidance on requirements and standards for:
SNAP-authorized retailers; EBT host processors; what is required to
perform and process an EBT transaction; how parties to a transaction
share and store transaction data; security measures related to EBT
transaction fraud and benefit theft; State EBT system implementation;
the design, security, and functions of EBT cards; SNAP Online and card-
not-present transaction requirements for internet retailers; SNAP EBT
mobile payments; and household EBT training.
The Department proposes to create and then subsequently revise the
Operating Standards on a regular, ongoing basis. The Department seeks
feedback regarding the format and frequency of future revisions.
The SNAP EBT Operating Standards are available within Appendix A of
Part 274.
EBT Cards With Chip and NFC Technology
While the regulatory definition at 7 CFR 271.2 for ``Electronic
Benefit Transfer (EBT) card'' includes chip cards within the
definition, at the time of this writing there are a limited number of
States actively working to transition their EBT payment system to
payment cards with electronic chip and near-field communication (NFC)
technology, commonly known as EMV (Europay, Mastercard and Visa)
technology from the commercial industry's security standard with that
name. EBT cards with chip and NFC technology have enhanced security
features that mitigate skimming and cloning attacks when compared to
EBT cards with only magnetic stripe technology.
Information available to FNA suggests a significant portion of EBT
benefit theft is due to skimming of EBT card data facilitated by
magnetic stripes. The Department believes that EBT cards utilizing chip
and NFC technology are likely to significantly reduce incidences of
benefit theft based on information available regarding the transition
to chip and NFC technology in the consumer payment industry. In the
early stages of chip and NFC adoption, Mastercard fraud data showed a
54 percent decrease in counterfeit fraud costs at US retailers
completing chip and NFC adoption from April 2015 to April 2016.\4\ Visa
fraud data showed in 2019 \5\ that merchants who accepted chip and NFC
cards ``witnessed a 76 percent dip in card present counterfeit payment
fraud since the U.S. payments industry began the shift to EMV chip.''
The shift to universal adoption of chip technology starting in 2015
(when liability was moved onto retailers for non-chip transactions),
and the increasing prevalence of NFC technology in the consumer payment
industry, together mean that many SNAP households will likely already
be familiar with the use of a payment card with chip and NFC
technology. The Department is also hopeful that the experience gained
from years of established use of chip and NFC technology in the
consumer payment industry will help expedite payment method transitions
for all parties as well as reducing costs involved when compared to
earlier transitions.
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\4\ <a href="https://presscenter.com/mastercard-chip-momentum-reducing-fraud-one-year-in/">https://presscenter.com/mastercard-chip-momentum-reducing-fraud-one-year-in/</a>.
\5\ <a href="https://usa.visa.com/visa-everywhere/blog/bdp/2019/05/28/chip-technology-helps-1559068467332.html">https://usa.visa.com/visa-everywhere/blog/bdp/2019/05/28/chip-technology-helps-1559068467332.html</a>.
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While mobile wallet payment systems may benefit from even greater
security due to the use of tokenization, a process that adds an
additional layer of authentication to the purchasing process by
replacing traditional card data with unique electronic tokens tied to
specific devices, the technology is newer and potentially requires
significant additional costs to provide token services. The
Agricultural Act of 2018 (Pub. L. 115-334) authorizes the use of mobile
technologies for the purpose of accessing SNAP benefits for payment at
the point-of-sale following up to five initial demonstration projects.
The Department will continue the Mobile Payment Pilot and evaluate its
results to determine if mobile payment technology should be authorized
or required nationwide in the future. At this time, the Department is
prioritizing chip and NFC technologies within the existing EBT systems
infrastructure to expedite more secure payment methods for all SNAP
households.
The Department is proposing a two-year timeframe after the date of
publication of a final rule for implementing requirements regarding the
issuance of SNAP benefits via EBT cards utilizing chip and NFC
technology. This timeframe will allow for sufficient testing of systems
with State agencies, third-party processors, EBT vendors, and retailers
both large and small, to ensure that no complications arise from the
switch in payment technology that could hinder SNAP clients from making
the same regular purchases that they rely on. However, the Department
encourages and continues to support States moving towards more secure
EBT cards before the proposed implementation date. As of August 2026,
seven States have issued EBT chip cards to participants with additional
States in progress.\6\
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\6\ <a href="https://www.fna.usda.gov/snap/ebt/modernization">https://www.fna.usda.gov/snap/ebt/modernization</a>.
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Aligned with this timeframe will be the requirement that States
adequately notify households and retailers in advance regarding any
such transition in payment method. In conjunction with this, the
Department proposes updating the definition of an EBT card, defined at
7 CFR 271.2 ``Electronic Benefit Transfer (EBT) card,'' to explicitly
include cards with integrated electronic chips capable of conducting
transactions either by being inserted into a card reader or via
wireless NFC protocols. The Department welcomes public comment on the
proposed chip and NFC technology implementation timeframe of two years
from the date of publication of the final rule and whether that
timeframe is both sufficient for compliance and effective at combating
electronic benefit theft.
As noted, a limited number of States are now actively working to
transition their EBT payment system to EBT cards with chip and NFC
technology. It is clear that transition to payment processing via chip
and NFC transactions will require significant system changes for all
parties involved, along with replacement of EBT cards for all
participants, as well as cooperation by retailers upgrading their
equipment to comply with the requirements needed to accept payments via
EBT cards with chip and NFC technology. The Department believes that
the best approach would be an expedited nationwide transition to EBT
cards with chip and NFC technology, as opposed to a limited pilot
program. This expedited
[[Page 66962]]
approach would be best due to the scale of the existing nationwide
threat of SNAP benefit theft through the skimming of EBT cards with
magnetic stripes, demonstrated clearly with at least $360 million in
stolen benefits that have been replaced through the second quarter of
Federal fiscal year 2025. Furthermore, an expedited transition would
streamline interoperability concerns and transition communications for
SNAP households.
The Department acknowledges that a transition to EBT cards with
chip and NFC technology will come at a financial cost to the State
agencies administering SNAP and to other entities involved in the
operation of EBT systems. However, the Department believes that it is
critical for SNAP clients to have reliable and secure access to the
benefits that they use to purchase food for their families, and that
the transition to chip and NFC cards in the credit/debit industry has
proven the effectiveness of the technology involved in reducing
incidents of fraud. Letting the consumer payment industry lead in
transitioning payment technology has positioned EBT to benefit from
experiences gained there and will help avoid costs that would otherwise
be encountered in developing untested payment technology. Further, as
stewards of taxpayer dollars, the Department considers these
administrative costs as a necessary investment to deter the loss of
Federally-funded SNAP benefits.
The Department also encourages State SNAP agencies to work with
retailers and retailer associations to ensure that as many SNAP
retailers as possible complete preparations for the acceptance of EBT
transactions via chip and NFC before State SNAP agencies begin the
process of replacing existing SNAP cards, to simplify the transition
from the perspective of SNAP households who might otherwise face
confusion over which transaction methods should be used at individual
retailers. Furthermore, the Department encourages State SNAP agencies
to educate SNAP households regarding the security benefits of chip and
NFC technologies to conduct transactions.
Given the current prevalence of issues with the timely delivery of
benefits in accordance with 7 CFR 274.2(b), the Department is
specifically interested in comments from State SNAP agencies on the
impact that migrating to EBT cards with chip and NFC technology would
have on over-the-counter issuance of EBT cards and for State
operations.
With the goal of a smooth transition to EBT cards with chip and NFC
technology, there will be a need for retailers to continue to accept
transactions via EBT card with magnetic stripe, for the time being
(although fallback rules would enforce the requirement of inserting/
tapping a card with a chip to attempt the transaction in that manner
before the magnetic stripe could be used). As such, the Department is
also interested in understanding the costs that will be borne by State
agencies, third-party processors of EBT transactions, and retailers to
ensure that point-of-sale machines can properly fall back to accepting
magnetic stripe transactions if chip/NFC-based transactions fail or are
otherwise unavailable (such as during a period of transition, or due to
shopping across State borders in a State that has not yet transitioned
to EBT cards with chip and NFC technology).
One consideration for moving to EBT cards with chip and NFC
technology is the limited lifespan of chip technology. As a result of
this, EBT cards with chip and NFC technologies will have expiration
dates. The Department proposes to update regulations at 7 CFR
274.6(b)(3), 274.6(b)(5), and 274.6(b)(6) to clarify that EBT cards
replaced as a result of their expiration date, or replaced as a result
of a change in benefit delivery method, must not be counted towards the
threshold for the number of card replacements considered excessive in 7
CFR 274.6(b)(5).
In conjunction with the move to EBT cards with chip and NFC
technology, the Department is proposing to update regulations at 7 CFR
274.8(b)(5)(vi) to specify that the PAN on each EBT card shall be
printed on the back of the card. This will enhance security measures by
making it more difficult to capture account information visually from
EBT cards and is aligned with the consumer credit/debit industry.
Magnetic Stripe
EBT's current reliance on magnetic stripes for payment cards is a
major enabler of benefit theft, as the account information stored on
the magnetic stripe can be easily read in plain text by skimming
devices that intercept card data during a transaction. This creates an
incentive for thieves who may have targeted credit/debit transactions
in the past, when they were conducted mainly via magnetic stripe, to
now focus their efforts on EBT cards made more vulnerable as one of the
last remaining payment methods conducted almost exclusively via
magnetic stripe.
The consumer payment card industry has begun preparations to phase
out magnetic stripes, with Mastercard stating in 2023 that ``by 2033,
no Mastercard cards will have magnetic stripes.'' \7\ With this in
mind, the Department is seeking public comment specifically related to
the eventual removal of magnetic stripes from EBT cards, particularly
regarding:
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\7\ <a href="https://www.mastercard.com/news/perspectives/2023/what-s-in-the-cards/">https://www.mastercard.com/news/perspectives/2023/what-s-in-the-cards/</a>.
--Barriers to the removal of magnetic stripes
--Alternative methods of conducting transactions if chip and NFC
technology fails at the point-of-sale
--Interoperability issues
--Timeframe for removal
The Department proposes revising the existing regulation at 7 CFR
274.8(b)(3)(ii)(C) to remove the reference to EBT cards specifically
containing magnetic stripes in advance of any transition away from
their use, as well as revising references at 7 CFR 274.6(b) to clarify
that the card replacement methods within that section of regulations
apply specifically to physical card replacements. This will enable a
transition away from magnetic stripe technology in the future and
ensure clarity if SNAP benefits are to be delivered via EBT cards in
non-physical form such as virtual cards in mobile wallets.
End of Manual Voucher Transactions
SNAP regulations in the past allowed SNAP retailers to redeem
benefits using manual vouchers if they did not have, or were unable to
use, a POS device to process SNAP transactions at the time of the
purchase. This was designed to help ensure that SNAP clients would not
be denied the ability to use their benefits as the result of unreliable
EBT system connectivity.
Since these manual voucher transactions do not require the use of a
secure PIN, they have been shown to be susceptible to fraud. The
Agricultural Act of 2014 (2014 Farm Bill) amended Section 7(f) of the
Act to prohibit the use of manual vouchers for benefit redemption,
except in the specific cases where the Secretary determines they are
necessary such as due to an EBT system outage or a disaster. The 2014
Farm Bill also provided the Department with the option to exempt
certain retailer categories from this prohibition based on established
criteria established by the Secretary if the Department determined it
appropriate.
The March 21, 2014, implementing memorandum for the 2014 Farm Bill
\8\ stipulated that this manual voucher restriction would be effective
immediately for any newly authorized
[[Page 66963]]
retailer. However, the memorandum also noted that until regulations
were promulgated, the Secretary was exempting those existing retailers
that were already using manual vouchers for ongoing business. At the
same time, the implementing memorandum stated that it was ``the intent
of the Secretary to largely eliminate manual vouchers as a means to
conduct ongoing business through regulations, but [that FNA would] use
the regulatory process to fully define the extent continued usage will
be permitted.'' Consistent with that stated intent, this rule proposes
to codify elimination of the usage of manual vouchers except in
disasters or in the event of an EBT system failure, with other
exceptions being limited.
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\8\ <a href="https://FNA-prod.azureedge.us/sites/default/files/snap/Farm%20Bill%20Implementation%20Memo.pdf">https://FNA-prod.azureedge.us/sites/default/files/snap/Farm%20Bill%20Implementation%20Memo.pdf</a>.
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Proposed language revising 7 CFR 274.3(a)(1)(i) would stipulate
manual vouchers be authorized only when there is a significant EBT
connectivity problem. This could occur as the result of either system
issues, or other outage issues, including those resulting from a
natural disaster. The Department's expectation is that State SNAP
agencies would require of their EBT vendors that the processing of
manual vouchers be disabled by default. Manual vouchers would then be
enabled by EBT vendors upon request by their State SNAP agency,
restricted to certain geographic areas as appropriate. FNA would
monitor for manual voucher use that would be considered excessive on an
ongoing basis, and work with States to resolve any issues encountered.
In situations where manual voucher use is not being appropriately
restricted and sufficient levels of fraud are being encountered as a
direct result, FNA may seek disallowance of administrative funding
under 7 CFR 276.4(a)(2) and 276.4(a)(3) regarding State agency
responsibilities for preventing losses of Federal funds.
It is important to note that manual voucher transactions are an
extremely small minority of SNAP transactions in total.\9\ The proposed
changes to manual vouchers would primarily impact retailers that
conduct business via delivery routes as well as some retailers
operating in remote areas; both have been known to rely on manual
vouchers historically as their principal method of benefit redemption.
Those retailers would be expected to utilize some form of mobile POS
device or mobile POS phone/tablet application to conduct their
business, with both approaches becoming even more commonplace in the
consumer payment industry since the implementing memorandum for the
2014 Farm Bill. Since the passing of that legislation, general internet
connectivity nationwide has improved significantly. A June 2020
Government Accountability Office report \10\ indicated that, based on
FCC data, broadband internet availability in rural areas of the US
increased from 45.7% to 77.7% from 2012 to 2018.
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\9\ In October 2023, 0.0057% of total SNAP transactions were
conducted via manual voucher. Of those, nearly 42% of the manual
voucher transactions were conducted by retailers in North Dakota and
Alaska, both of which contain significant rural areas.
\10\ <a href="https://www.gao.gov/assets/gao-20-535.pdf">https://www.gao.gov/assets/gao-20-535.pdf</a>.
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The Department will consider allowing limited exceptions on a case-
by-case basis in specific scenarios, and seeks public comment regarding
the need for these exceptions:
First, the Department will consider an exception for retailers that
regularly process transactions via manual vouchers in rural areas that
do not have internet connectivity, such as some areas of Alaska, making
it impossible to utilize mobile POS devices or mobile POS phone/tablet
applications.
Second, the Department will consider exempting retailers who are
eligible for free State-provided EBT equipment due to the nature of
their organization.
Third, the Department will consider exempting retailers in
designated Tribal areas from requirements regarding manual vouchers.
During consultation with Tribal leaders on March 15, 2024, a summary of
this proposed rule was presented and there were no concerns expressed.
EBT Equipment Costs
To better align SNAP with current industry practices, the 2014 Farm
Bill amended Section 7(f) of the Food and Nutrition Act to require that
all non-exempt retailers be financially responsible for any EBT
equipment, supplies, and related services needed to participate in EBT.
As a result, most retailers are no longer eligible to receive free EBT
equipment, supplies, and related services to participate in SNAP which
they may previously have been eligible for.
This legislative change recognized that credit and debit card usage
is more prevalent today than it was when EBT was first implemented, and
the equipment needed for card acceptance has become nearly ubiquitous.
The statute provided exemptions for farmers markets, direct marketing
farmers, military commissaries, non-profit food buying cooperatives,
and establishments, organizations, programs or group living
arrangements described in clauses (3), (4), (5), (7), (8), and (9) of
section 3(k) of the Act. While this change was put in place by the
March 21, 2014, FNA implementing memorandum,\11\ it must still be
codified in regulations.
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\11\ <a href="https://FNA-prod.azureedge.us/sites/default/files/snap/Farm%20Bill%20Implementation%20Memo.pdf">https://FNA-prod.azureedge.us/sites/default/files/snap/Farm%20Bill%20Implementation%20Memo.pdf</a>.
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This proposed rule would codify the statutory provision by making
changes accordingly at 7 CFR 274.3(a)(2). The Department also proposes
changing regulations in this area at 7 CFR 274.3(b) to remove outdated
requirements regarding EBT terminal deployment, to properly reflect
that FNA currently only requires States to provide no-cost, EBT-only
POS equipment to retailers exempted by the Agricultural Act of 2014
from the requirement that SNAP retailers pay for their own EBT
equipment. All other retailers must source their own equipment to be
able to process EBT transactions.
SNAP Transaction and Account Information Access
Informational awareness is a critical element in benefit theft
prevention and early detection of signs of potential fraud. 7 CFR
274.7(d) requires that SNAP households be able to access their account
balances, and that EBT systems be ``. . . capable of providing a
transaction history for a period of up to 2 calendar months to
households . . .'' but the existing regulation does not specify the
information regarding each transaction which should be included in that
transaction history, nor how quickly the systems which display this
information to SNAP clients be updated with new transaction data.
As a result, existing online account management systems and mobile
account information applications accessed by SNAP participants in some
States do not currently display detailed information such as retailer
names and locations of prior purchases made, and do not offer
participants the ability to review certain activity on their account
such as balance inquiries. The lack of a requirement for immediate
updates to this information also means that some EBT systems only make
SNAP transaction information available after a delay. Both of these
shortcomings hinder the abilities of SNAP households to review and
confirm the activity on their own account to ensure purchases made and
other actions taken are legitimate.
The Department intends to create new provisions in SNAP regulations
at 7 CFR 274.8(b)(4)(i)(H) and 274.8(b)(4)(i)(I) to specify information
which must be made available to SNAP participants when they review
their benefit account through an online account management
[[Page 66964]]
system or mobile account information system, including:
--Transaction dates, times, and amounts
--Type of transaction (card-not-present or card present. Card-not-
present transactions would be encountered when making purchases from
internet retailers)
--Identifying information for retailer, excluding FNA retailer numbers
--History of balance inquiries made
--History of PIN changes
--History of other personal account information changes including
address, email address, and telephone number
The Department also intends to revise SNAP regulations at 7 CFR
274.7(d)(2) to require EBT systems to provide 12 months of transaction
history instead of the current requirement of 2 months. This will align
SNAP with the Consumer Financial Protection Bureau's Regulation E
requirements for electronic fund transfers at 12 CFR 1005.15(d)(1)(ii).
These regulatory updates will also require that the required
information be made available to SNAP clients immediately after SNAP
purchases are made. With these changes in place, the Department
believes SNAP households will have greater informational awareness
regarding the integrity of their account and will be able to monitor
their benefit account for potentially fraudulent transactions.
One concern regarding this information being made available
involves victims of domestic violence. There is the possibility that a
household member who has fled a domestic violence situation could be
tracked using a SNAP online cardholder portal or cardholder mobile
application by another household member with access, who would be able
to review the location of purchases made with the SNAP benefits. The
Department is considering requiring that State agencies accept verified
requests via telephone or in-person contact to disable all location-
based account information (including masking transaction locations) in
their online cardholder portal and mobile application for a specific
account, and requests comment from the public in this area
specifically.
Balance Inquiries
At this time, there are no requirements regarding verification of
minimum information for a balance inquiry to be conducted via IVR. As a
result, it is possible for bad actors to conduct bulk balance inquiries
via the EBT customer service phone number. These bulk balance inquiries
facilitate benefit theft by making it significantly easier for bad
actors to determine which card data can potentially be exploited.
To prevent benefit theft, the Department proposes creating
regulations at 7 CFR 274.7(d)(4) and using the SNAP EBT Operating
Standards document (see Appendix A to Part 274) to require that SNAP
balance inquiries conducted via IVR shall require verification. This
will help reduce incidents of bad actors using IVR as a method of
enabling and expediting benefit theft--a pattern that has been noted
across the country by State SNAP agencies reporting to FNA trends in
EBT benefit theft. The verification must involve secured information
(such as additional card security features) but should not involve PII,
as a SNAP household may include multiple persons shopping with the
benefits of the SNAP account.
As an additional measure to ensure the integrity of balance
inquiries, the Department intends to revise existing regulations at 7
CFR 274.7(d)(1) to permit internet retailers to conduct business
without offering a method of balance inquiry. Online balance inquiry
methods can be vulnerable due to security flaws, and FNA regularly
grants waivers in this area currently as a matter of business. The
Agency has not received any complaints regarding balance inquiry
availability after 5 years of the pilot program for SNAP online
purchasing. Though the Department considers it a safe assumption that
households who are making SNAP purchases online can conduct a balance
inquiry online in a secure manner by logging into their State's SNAP
cardholder portal or mobile application, public comments regarding the
accessibility and security of balance inquiries are welcomed.
In addition, the introduction of internet retailers has brought
awareness to the outdated requirements in 7 CFR 274.7(d)(3) and
274.8(b)(7) that mention printed receipts. Since many internet
retailers (and some brick-and-mortar retailers) now take advantage of
electronic receipts, the Department proposes revising these regulations
to remove the word ``printed'' to clarify that retailers may also
provide receipts via electronic means.
Household Training Updates
Current regulations at 7 CFR 274.2(e) on household training
requirements for SNAP households do not specify that the households be
trained on best practices to avoid EBT benefit theft, although FNA does
offer a Tips and Resources website \12\ with suggestions for SNAP
clients to follow to reduce incidents of SNAP fraud.
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\12\ <a href="https://www.FNA.usda.gov/snap/stolen-benefits">https://www.FNA.usda.gov/snap/stolen-benefits</a>.
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Household training should empower SNAP households not only with the
knowledge needed to use their SNAP benefits, familiarity with program
requirements, and awareness of time limits for using SNAP benefits
before they are expunged, but also with knowledge of security best
practices that will reduce their chances of being a victim of benefit
theft. The training requirements' message and format should also
balance not overwhelming participants with information that prevents
them from absorbing the most important knowledge.
The Department proposes updating the household training
requirements accordingly. The Department does not intend to change or
specify to State agencies the method in which each element of household
training should be delivered, as long as all clients can be assured to
receive all elements of the required household training.
The Department proposes revising training requirements to include
familiarizing participants specifically with:
--Timeframes within which households are to be given the opportunity to
participate (also known as timeliness requirements);
--The issuance schedule and availability date for households to access
their benefits;
--The appropriate utilization and security of the EBT card's PIN
including a number of important steps to take in fraud prevention;
--Responsibilities in reporting theft of or damage to a physical EBT
card, and responsibilities in reporting suspected fraud;
--Information regarding EBT card replacement, including any applicable
fees;
--Requirements regarding availability of information in languages other
than English, for households with disabilities, and the inclusion of
civil rights statements;
--Information needed to recognize retailers where EBT benefits can be
used;
--Information regarding retailer-initiated debit adjustments and a
household's right to notice, fair hearings, and provisional credits, as
well as how to dispute such adjustments by requesting a hearing and the
timeframes involved;
[[Page 66965]]
--The right to request an adjustment in case of an error transaction
and the timeframes involved;
--Timeframes involving benefit expungement;
--Information regarding replacement of food destroyed in a household
misfortune including the timeframe for a timely report;
--Food that is eligible for purchase with SNAP benefits;
--The prior payment prohibition described in 7 CFR 274.7(b);
--Information on transaction limits as described in 7 CFR 274.7(c);
--Information regarding container deposit fees;
--Common methods of EBT theft and how to avoid them;
--Where information regarding rights and responsibilities as a SNAP
client can be found;
--Information regarding expiration dates on physical EBT cards and the
resulting replacement, in order to avoid client confusion with
misinterpreting expiration dates as reflecting either benefit
expungement or certification period end dates.
Codifying Common Waivers
FNA routinely receives EBT waiver requests regarding client-
initiated credit adjustments and retailer-initiated debit adjustments
that replace the timeliness standard of 10 business days with an
extended time period of 15 calendar days and that allow State SNAP
agencies to act on retailer-initiated debit adjustment requests without
placing a hold on the adjustment balance in the household's account.
The Department proposes revisions to regulations at 7 CFR 274.2(g)(2)
to bring the procedures for client-initiated credit adjustments and
retailer-initiated debit adjustments in line with these waivers, which
are commonly approved, to simplify SNAP operations and ensure that
State agencies will not need to potentially revise training material
contingent on waiver approval or denial.
The Department also proposes revisions to 7 CFR 274.2(f)(2)(i)
regarding the ability of clients to select PINs for their EBT cards via
IVR telephone system. Current regulations state that PINs provided to
or selected by SNAP clients for use in accessing benefits in the
household's EBT account must be encrypted, at a minimum, from the point
of entry, in accordance with the current requirement at 7 CFR
274.8(b)(3)(ii)(C). This protects the client's PIN both when the client
is initially selecting it at the local office and afterwards when using
it to make a purchase at a POS device. Because of this encryption, the
PIN cannot be viewed or obtained by someone else with access to the
system, whether authorized or not. However, due to these regulations,
States have needed to obtain a waiver from this requirement to allow
clients to select their own PINs over a telephone or cellular line
through an IVR system, a process in which the PIN is not encrypted when
the client first enters a PIN of his/her own choosing. FNA has approved
this waiver to allow States to provide this enhanced customer service.
However, in doing so, the Agency has also reminded States that they
would have liability for any losses resulting from this procedure.
In response to State waiver requests, the proposed rule would allow
States the option to give clients the ability to select their own PIN
at their convenience without having to visit the local certification
office. While this procedure is consistent with the PIN selection
process used by commercial bank customers, it does pose inherent risks
when compared to the encrypted capture and transmission of a PIN from
the point-of-entry utilizing PIN select devices. As a partial
safeguard, the Department would also require the process to be
completely automated, with no involvement of a customer service
representative, and that clients using this process would need to enter
two elements of their personally identifiable information (PII) to
confirm their identity. Consistent with Section 7(e)of the Act, and FNA
regulations at 7 CFR 274.1(d)(1). FNA would also continue to require
States to accept liability for any losses resulting from this
procedure, such as the replacement of the lost benefits due to an
unauthorized transaction, compromise in security, or incorrect
identification of the person requesting a PIN via the telephone.
Implementation of Specific Anti-Fraud Measures in EBT Systems
EBT vendors offer to State SNAP agencies a variety of optional card
security services focused on combating EBT fraud. Many of these
services involve household-selected options to restrict usage of their
account in some form, while other services can affect how households
manage use of their benefits. However, States are not required to elect
any of the most common card security services designed to reduce levels
of EBT fraud.
Section 501(a) of Title IV within Division HH of the Consolidated
Appropriations Act, 2023 required that the Department issue guidance to
State SNAP agencies to protect and replace SNAP benefits stolen via
card skimming, card cloning, and other similar fraudulent methods. In
response to this, the Department published Tips and Resources \13\
regarding fraud mitigation best practices for SNAP participants, State
SNAP agencies, and SNAP retailers. One of the recommendations for State
SNAP agencies was to ``Let SNAP households know how to opt into card
security services that proactively protect their cards and PINs.''
However, SNAP clients are unable to opt into card security services
when they live in a State that has not worked with their EBT vendor to
make some or all of these card security services available. Different
State SNAP agencies have elected to implement different optional card
security services, leaving households with different treatment and
protections depending on their location.
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\13\ <a href="https://www.FNA.usda.gov/snap/stolen-benefits">https://www.FNA.usda.gov/snap/stolen-benefits</a>.
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The Department proposes adding a new regulation at 7 CFR 274.7(k)
to require that all State SNAP agencies offer a minimum list of
specific card security services, referred to as participant-selected
account options. The regulation will refer to the SNAP EBT Operating
Standards (see Appendix A to Part 274), which will contain the list of
specific card security services required, many of which are designed to
reduce incidents of benefit theft.
The Department also proposes updating 7 CFR 274.7(d) to require
that States establish standards covering client access to platforms
such as client websites, EBT cardholder portals, or mobile applications
that clearly inform clients of balances, features, security options,
and other services available for their EBT account.
First, regulations at 274.2(f)(2)(i) and the SNAP EBT Operating
Standards document (see Appendix A to Part 274) will require that
States disallow the use of common PINs, including PINs with:
--Entirely sequential digits (with zero considered sequential to both
one and nine);
--Entirely reverse sequential digits (with zero considered sequential
to both one and nine);
--One digit repeated for the entire length of the PIN;
--The last digits of the associated EBT card's PAN;
--Entirely alternating digits (e.g., 1212, 8989, or 5454);
--The first two digits 19 (potential birth year vulnerability);
--The first two digits 20 (potential birth year vulnerability);
--The sequential digits 2580, 8520, 0852, or 0258 (these sequences are
[[Page 66966]]
common as they reflect the vertical digits of a numeric keypad in
order).
Second, the SNAP EBT Operating Standards document will require that
States offer SNAP households the self-service ability to elect or
remove all of the following specific account options at a minimum:
--An account block on out-of-State transactions;
--An account block on card-not-present (online) transactions;
--An account block on all transactions;
--Alerts delivered via email or text message for purchases on the
account, including rejected purchases, out-of-State purchases, and
purchases over a user-selected limit;
--Alerts delivered via email and/or text message for specific account
activity such as PIN changes, balance inquiries, and changes to
personal account information such as address, email address, or
telephone number;
--A user-selected maximum transaction limit, over which all
transactions are to be blocked.
There are some States which, working with their EBT host
processors, have already opted to provide transaction blocking account
options to SNAP households. In States where these options are
available, a particular type of blocking (for example, an account block
on out-of-State transactions) may be enabled by default for SNAP
households as long as States adhere to statute and regulations
regarding interoperability and ease-of-use for EBT transactions. The
Department seeks comments on concerns or benefits related to blocking
transactions by default.
Clients must be able to opt-in to these account options via all of
the following methods, and clients should not be restricted in making
such a selection in any way by disability or speaking a primary
language other than English:
--EBT cardholder portal
--Mobile application or equivalent mobile-first web interface
--Telephone request
--In-person request
Fourth, newly proposed regulations at 274.2(f)(3) and the SNAP EBT
Operating Standards document will require that States issue EBT cards
that are not active until the recipient takes actions to enable the
card.
Vendor Monitoring of EBT Terminals
Current regulations require State SNAP agencies to ensure that only
authorized retailers can access the EBT system. This is important to
the integrity of the EBT system, as unauthorized EBT terminal usage by
bad actors can facilitate the commission of EBT fraud in several ways.
First, bad actors can use EBT terminals to verify skimmed card data
by attempting to make purchases or balance inquiries to determine which
benefit accounts they are able to access.
Second, bad actors can utilize fraudulent balance inquiries to
facilitate algorithmic attacks where large quantities of transactions
are attempted using computer automation to find access to new benefit
accounts.
Third, bad actors can input fraudulent transactions to drain funds
from SNAP benefit accounts. These events have been encountered in
greater numbers in recent years, as witnessed by State agencies
monitoring terminal usage and receiving reports of fraud. Illegitimate
access is made possible by third-party processors or their contracted
independent sales organizations (e.g., sub-vendors), who facilitate
payment for EBT transactions via the EBT gateway. When third-party
processors and independent sales organizations fail to verify that
retailers they transact with are authorized by FNA to participate in
the program before they process any transactions from a given retailer,
they make it possible for bad actors to access the EBT system. The
Department is exploring various ways to address this issue, in
alignment with the priorities of the Task Force to Eliminate Fraud
established in Executive Order 14395.\14\
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\14\ National Archives, ``Establishing the Task Force to
Eliminate Fraud,'' <a href="http://Federalregister.gov">Federalregister.gov</a>, 2026, <a href="https://www.federalregister.gov/documents/2026/03/19/2026-05497/establishing-the-task-force-to-eliminate-fraud">https://www.federalregister.gov/documents/2026/03/19/2026-05497/establishing-the-task-force-to-eliminate-fraud</a>, Accessed July 17,
2026.
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The Department proposes revising 7 CFR 274.3(e)(4) and
274.8(b)(3)(v)(F) to clarify that State SNAP agencies, and by extension
their contracted EBT vendors, both play a critical role in denying
access to bad actors and must perform adequate due diligence. EBT
terminal usage must be actively monitored by the EBT vendors contracted
by State SNAP agencies to remove unauthorized terminal access to the
EBT system, in accordance with existing regulations at 7 CFR
274.8(b)(3)(ii)(A) which require controls to ``ensure acceptance of
data from authorized terminals only.''
FNA is improving fraud prevention efforts with support from third
party vendors by providing ways in which FNA can block miscoded payment
terminals from accessing the EBT network. FNA expects that State
agencies and their contracted EBT vendors will investigate and consider
such terminals for deactivation. Additionally, FNA is working with
State agencies and providing technical support to help identify and
block miscoded terminals. New retailers participating in the EBT system
with addresses that do not match the address registered for their FNA
retailer account number must also be investigated where possible.
In the event of unchecked fraudulent activity, clear signs of
unauthorized access, or other similar negligence with no response or
action taken to address an ongoing issue, FNA may seek disallowance of
administrative funding under 7 CFR 276.4(a)(2) and 276.4(a)(3)
regarding State agency responsibilities for preventing losses of
Federal funds.
Requiring Timely Updates to EBT Systems in Accordance With the X9.58
Technical Specifications
Current regulations require that State SNAP agencies ensure their
EBT systems comply with technical specifications established by the
American National Standards Institute (ANSI) and International
Organization for Standardization (ISO) where applicable, but do not
explicitly cover technical specifications established by the Accredited
Standards Committee (ASC) X9. ASC is responsible for the development of
their technical specification X9.58 Financial transaction messages--
Electronic benefits transfer (EBT)--Supplemental Nutrition Assistance
Program (SNAP) to accommodate the use of EBT cards with chip and NFC
technology, as well as specifying all aspects of EBT financial
transaction data transmission. The latest revision to the ASC X9.58
technical specification was released in 2024,\15\ but the Department
also assumes that ASC X9 will implement additional revisions in the
future, as payment technology continues to grow and evolve. The ASC
X9.58 technical specification has previously been updated in 2022,
2013, and 2007. When updates are made to the ISO 8583 or ANSI X9.58
specification, or other applicable specifications, the Department
proposes that State agencies ensure EBT systems comply with the new
version of the specification within 180 days from the publication of
the updated specification.
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\15\ <a href="https://x9.org/new-version-of-x9-58-standard-upgrades-usda-snap-ebt-cards/">https://x9.org/new-version-of-x9-58-standard-upgrades-usda-snap-ebt-cards/</a>.
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The Department welcomes public comment on the 180-day timeframe for
compliance, with the understanding that deploying upgrades to EBT
systems can require significant financial resources in addition to the
time and staffing requirements needed to ensure successful deployment.
The Department also proposes revising regulations at 7 CFR
274.8(b)(3)(iv)(B) to require that State
[[Page 66967]]
EBT systems and data processing centers utilize multifactor
authentication as a method of enhancing internal security. Multifactor
authentication is commonly used in the consumer payment industry and
requires at least two forms of verification to protect online accounts,
such as password, a one-time pin sent to a verified email or phone, and
user selected challenge question.
Delete References to Offline EBT Systems
Regulations at 7 CFR 274.1(b) currently require SNAP benefits to be
issued via either an online EBT system involving a central computer
database accessed electronically by EBT cards at the point of sale, or
an offline EBT system with benefit allotments stored on EBT cards. 7
CFR 274.1(b)(2) currently permits State agencies to issue SNAP benefits
through an offline EBT system in which ``. . . benefit allotments can
be stored on a card or in a card access device and used to purchase
authorized items.''
No States currently use an offline EBT system, and none are
expected to in the future. Given that all States now utilize an
approach to managing accounts in which benefits are issued from and
stored in an online central databank, as well as the existence of new
initiatives such as online purchasing and mobile payments, each relying
significantly on online EBT systems, the Department does not believe an
offline EBT system would be a viable alternative to online EBT systems
going forward. Only two States have ever used an offline EBT system for
SNAP. The last State to use an offline EBT system was Wyoming, which
moved to an online EBT system in May 2007.
In addition to these developments away from offline EBT systems, 7
CFR 271.2 currently defines EBT as a system where benefits are ``. . .
issued from and stored in a central databank.'' This also points away
from an offline system where benefits are primarily stored on the
cards. As a result of these factors, the Department is proposing to
update the regulations by removing 7 CFR 274.1(b) and adding `online'
to the definition of an EBT system in 7 CFR 271.2 ``Electronic Benefit
Transfer (EBT) system''. As noted, no States would be impacted by this
change.
Related to this change, the Department proposes modifying
regulations at 7 CFR 274.1(c) to note that when the Secretary, in
consultation with the Office of Inspector General, determines that
program integrity would be improved by changing the issuance system of
a State, the alternative method would no longer be limited to one of
the methods currently described in 274.1(b). This will allow States to
utilize methods of payment issuance in the future that may not exist
currently, as consumer payment technology continues to develop.
Implementation of Card Security Code (CSC) and Expiration Date
SNAP's existing Online Purchasing Pilot began in 2019 and quickly
expanded to all States as a result of the COVID-19 pandemic. While much
of the online shopping experience is consistent with online purchasing
using credit/debit cards, a significant difference is the lack of
printed card security codes, or CSCs, and expiration dates on EBT
cards. The type of CSC that will be most familiar to users of debit and
credit cards is the 3 or 4-digit code printed on the payment card,
which is commonly entered by the customer when conducting card-not-
present transactions with internet retailers (along with other
information such as zip code and expiration date of the card).
Since the CSC and expiration date are not encoded in the data on
the card but merely printed on the surface of the card and entered at
the time of purchase, this information cannot be obtained by
traditional electronic skimming methods that take data from a payment
card's magnetic stripe. The addition of the CSC and expiration date
significantly enhances security for card-not-present (online)
transactions by requiring customers to enter these additional values
which are not encoded in the data on the card and are not stored at any
time by retailers.
The Department intends to revise regulations at 7 CFR
274.8(a)(2)(ii) and use the SNAP EBT Operating Standards document to
require specific security measures for card-not-present (online)
transactions, including primarily the use of a CSC and expiration date
as part of these transactions. This will mirror best practices already
established in the consumer payment industry.
While this will add an additional step to card-not-present (online)
transactions, the Department considers this additional step worth the
value provided in terms of reducing benefit theft. Many households will
already be familiar with the entry of a CSC and expiration date while
making online purchases, due to the prevalence of the requirement when
using credit/debit cards, so this additional step is unlikely to cause
confusion when encountered.
Interoperability and Interchange Fees
Existing regulations regarding interoperability including 7 CFR
274.8(b)(10) apply to all aspects of any changes resulting from
implementation of the requirements of this rule. Benefits issued via
EBT by any one State must continue to be able to be redeemed for food
purchases in any other State. Therefore, no State should take actions
in response to this rule which would prevent benefits issued from being
redeemed in another State.
The Department also proposes adding a new section in the
regulations at 7 CFR 274.3(a)(4) to clarify that interchange fees shall
not apply to any EBT transaction, even if the retailer uses commercial
equipment provided by an independent third-party processor to accept
SNAP benefits. These changes will align regulations with the
prohibition of interchange fees in Section 7(h)(13)(A) of the Food and
Nutrition Act.
Mobile Purchasing Virtual EBT Card Provisioning
The SNAP Mobile Purchasing pilot remains in progress at this time.
The Department looks forward to recommendations that will be made in
the future resulting from the resolution of the pilot with regard to
provisioning of virtual EBT cards on mobile devices for making SNAP
payments. Outcomes from the pilot will be used to inform future rule
making or updates to the SNAP EBT Operating Standards. Therefore, this
rule does not propose any regulatory changes regarding virtual EBT
cards on mobile devices at this time.
Procedural Matters
Executive Orders 12866 and 13563
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility.
This proposed rule has been determined to be economically
significant under section 3(f)(1) of Executive Order 12866 and was
reviewed by the Office of Management and Budget (OMB).
[[Page 66968]]
Regulatory Impact Analysis Summary
As required for all rules that have been designated as Significant
by the Office of Management and Budget, a Regulatory Impact Analysis
(RIA) was developed for this proposed rule. It follows this rule as an
Appendix. The following summarizes the conclusions of the regulatory
impact analysis:
Need for Action: Required to reflect mandates within Section 501 of
the Consolidated Appropriations Act of 2023 (Pub. L. 117-328, the
Omnibus) to modernize Electronic Benefit Transfer (EBT) technology and
improve EBT security measures required to prevent EBT benefit theft
committed by electronically stealing EBT card information and similar
methods.
Benefits: Reduces the amount of SNAP benefits electronically stolen
from SNAP participants. In turn, these individuals may experience
reduced psychological stress and financial insecurity. There may also
be improved trust in government programs, improved fairness in payment
security for low-income households, and improved access to information
and knowledge.
Costs: This proposed rule would result in one-time burdens for
State agencies, the Federal Government, households, and businesses at
implementation (roughly $283 million combined in FY 2028-2029). There
would also be ongoing costs to State agencies, the Federal Government,
and businesses starting in FY 2030 ($12 million in that year, roughly
$152 million in total FY2028-2037).
Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601-612) requires Agencies
to analyze the impact of rulemaking on small entities and consider
alternatives that would minimize any significant impacts on a
substantial number of small entities. Pursuant to that review, it has
been certified that this rule would have a significant impact on a
substantial number of small entities.
Congressional Review Act
Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.),
the Office of Information and Regulatory Affairs designated this rule
as a `major rule' as defined by 5 U.S.C. 804(2).
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 proposed 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
This Supplemental Nutrition Assistance Program is listed in the
Catalog of Federal Domestic Assistance under Number 10.551 and is
subject to Executive Order 12372, which requires intergovernmental
consultation with State and local officials. (See 2 CFR chapter IV.)
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.
The Department has considered the impact of this rule on State and
local governments and has determined that this rule does not have
federalism implications. Therefore, under section 6(b) of the Executive
Order, a federalism summary is not required.
Executive Order 12988, Civil Justice Reform
This proposed rule has been reviewed under Executive Order 12988,
Civil Justice Reform. This 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
FNA has reviewed the proposed rule, in accordance with the
Agriculture Improvement Act of 2018, ``2018 Farm Bill'', Section 12403,
Civil Rights Analyses, to identify and address any major civil rights
impacts the proposed rule might have on minorities, women, and persons
with disabilities. While FNA expects that a relatively small share of
SNAP participants may be wary of the changes to their EBT cards and a
small number of retailers will need to adopt mobile POS technologies to
end their reliance on manual vouchers, the implementation of mitigation
strategies, such as plain-language communication and partnerships with
outreach and retailer partners, will lessen these impacts.
Additionally, the FNA Civil Rights Division will propose further
outreach and mitigation strategies to alleviate any unforeseen impacts,
if deemed necessary.
After a careful review of the rule's intent and provisions, FNA has
determined that this rule is not expected to affect the participation
of protected individuals in the Supplemental Nutrition Assistance
Program.
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.
This rule potentially has issues that require consultation. FNA
consulted with Tribal leaders on March 15, 2024, and no feedback was
received. If a Tribe requests consultation, FNA will work with USDA's
Office of Tribal Relations to ensure meaningful consultation is
provided.
Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (44 U.S.C. Chap. 35; 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.
We are seeking a new OMB
[[Page 66969]]
Control Number for the new, existing, and changing provisions in this
rule. These changes are contingent upon OMB approval under the
Paperwork Reduction Act of 1995. Additionally, when the information
collection requirements have been approved, FNA will publish a separate
action in the Federal Register announcing OMB's approval.
In accordance with the Paperwork Reduction Act of 1995, this
proposed rule contains information collections that are subject to
review and approval by the Office of Management and Budget; therefore,
FNA is submitting for public comment the changes in the information
collection burden that would result from adoption of the proposals in
this rule.
Please also send a copy of your comments to Food and Nutrition
Administration, SNAP Innovation Policy and Issuance Division, Issuance
Support Branch, 5601 Sunnyside Ave, Beltsville MD, 20705. For further
information, or for copies of the information collection requirements,
please contact FNA at the address indicated above.
Comments on this proposed rule must be received by December 22,
2026. Comments are invited on: (a) Whether the proposed collection of
information is necessary for the proper performance of the functions of
the agency, including whether the information shall have practical
utility; (b) the accuracy of the agency's estimate of the burden of the
proposed collection of information, including the validity of the
methodology and assumptions used; (c) ways to enhance the quality,
utility, and clarity of the information to be collected; and (d) 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 notice 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: Electronic
Benefits Transfer Card Security Measures.
OMB Number: 0584-NEW.
Forms: None.
Expiration Date: Not Yet Determined.
Type of Request: New.
Abstract: The Consolidated Appropriations Act, 2023, requires the
Department to issue regulations establishing security measures to
identify and prevent SNAP benefit theft. The measures must be
consistent with industry standards for detecting, identifying, and
preventing debit and credit card skimming, card cloning, and other
fraudulent methods and must consider implementation feasibility for the
States. This proposed rule modernizes Electronic Benefit Transfer (EBT)
technology and brings EBT into alignment with consumer payment
processing industry standards, improving the experiences of SNAP
participants. FNA is requesting a new OMB Control Number for the
requirements in this proposed rule.
The proposed rule includes numerous proposals to enhance EBT card
security and account usability. Several of these proposals will result
in an increase in reporting burdens for State SNAP agencies,
Individuals/Households, Business-for-profit such as EBT host
processors, and some SNAP retailers. There is no recordkeeping or
third-party disclosure associated with this rulemaking.
First, the rule proposes creating SNAP EBT Operating Standards,
which would be revised on a regular, ongoing basis. SNAP EBT Operating
Standards would allow the Department to revise EBT requirements more
dynamically in response to rapidly evolving payment technology and best
practices in the consumer payment industry. Some of the SNAP EBT
Operating Standards will create an information collection burden, as
discussed below.
In this proposed rule, the Department will require State SNAP
agencies to upgrade to EBT cards utilizing chip and NFC technology, as
well as require that SNAP retailers accept EBT transactions via chip
and NFC technology, within a certain time frame. Based on the
experience of the consumer payment industry, the Department believes
EBT cards utilizing chip and NFC technology will significantly reduce
SNAP benefit theft due to the enhanced security features that mitigate
skimming and cloning attacks. Households will be required to activate
these new chip cards upon receipt, and households experiencing
homelessness may need to travel to a local office to obtain their new
card.
The proposal will also update the regulations at 7 CFR 274.2(e) on
EBT household training requirements for SNAP participants. Under the
proposed regulations, the EBT household training will inform households
about security best practices that will reduce their chances of being
affected by benefit theft, in addition to their rights and
responsibilities and how to use their benefits.
The proposal will create new regulations at 7 CFR 274.8(b)(4)(i)(H)
and 274.8(b)(4)(i)(I) to specify information that must be made
available to all SNAP participants, including transaction dates, times,
and amounts; retailer name and location; balance inquiry history; PIN
change history; and history of other account management changes
including address, email address, and telephone number. These changes
will better equip SNAP households to review their account activity and
detect potentially fraudulent activity.
The proposal makes two changes regarding balance inquiries. The
SNAP EBT Operating Standards (see Appendix A to Part 274) will require
verification for all SNAP balance inquiries, and the proposal will
update 7 CFR 274.7(d)(1) to permit internet retailers to conduct
business without offering balance inquiry, codifying a standard waiver
the Department currently issues. Related to this, the Department
proposes revising 7 CFR 274.7(d)(3) and 274.8(b)(7) to confirm that
transaction receipts may be delivered via electronic means. As
transaction receipts are required to be provided, eCommerce providers
and internet retailers that do not use an eCommerce provider will need
to modify their website purchasing pages accordingly.
The proposed rule revises 7 CFR 274.3(e)(4) and 274.8(b)(3)(v)(F),
to clarify that State SNAP agencies, and by extension their contracted
EBT vendors, both play a critical role in denying access to bad actors.
The proposed rule also revises regulations at 7 CFR 274.8(b) and
274.8(b)(10)(ii) to require all participants in the EBT system to
update their systems in accordance with the X9.58 technical
specification to ensure proper functioning of the system.
Finally, the proposed rule would revise 7 CFR 274.7(d)(3) and
274.8(b)(7) to confirm that transaction receipts for online purchases
may be delivered via online cardholder accounts, confirmation invoices,
other electronic communications such as email or text messages, or
printed invoices upon delivery.
In addition to the changes discussed above, the proposed rule also
includes changes that do not have an information collection burden.
These include: updates to 7 CFR 274.8(b)(5)(vi) to specify that the
primary account number shall be printed on the back of each EBT card;
updates to 7 CFR 274.6(b)(3), 274.6(b)(5), and 274.6(b)(6) clarifying
that EBT cards replaced as a result of their expiration date must not
be counted towards the excessive card replacement threshold; updates at
7 CFR 274.6(b), 274.6(b)(2), and 274.8(b)(3)(ii)(C) to remove
references to
[[Page 66970]]
magnetic stripes and to clarify that card replacement does not apply
only to physical cards; updates to 7 CFR 274.3(a)(1)(i) ending the use
of manual vouchers as a means to conduct ongoing business, except in
certain limited circumstances; updates to 7 CFR 274.3(a)(2) to codify
the 2014 Farm Bill amendment regarding non-exempt retailers' financial
responsibility for EBT equipment, supplies, and related services;
updates to 7 CFR 274.3(b) to remove outdated requirements regarding EBT
terminal deployment; removal of 7 CFR 274.1(b) and updates to 7 CFR
271.2 ``Electronic Benefit Transfer (EBT) system'' to remove the option
of offline EBT systems; updates to 7 CFR 274.3(a)(4) to clarify that
interchange fees shall not apply to any EBT transaction; the creation
of 7 CFR 274.2(f)(3) to require that EBT cards are issued in an
inactive state; and updates to 7 CFR 274.8(b)(5)(vii) to require EBT
cards to contain card security codes (CSCs). The proposed SNAP EBT
Operating Standards and regulations at 274.7(k) will also require that
all State SNAP agencies offer certain specific card security services
provided by EBT vendors. States will be required to prohibit use of
common PINs and offer participant-selected account options to manage
and monitor their own account usage. Relatedly, the proposal creates
new regulations at 7 CFR 274.8(a)(1)(ii) and modifies regulations at 7
CFR 274.3(f)(2)(i) to require PINs to comply with the specifications of
the SNAP EBT Operating Standards.
First Year (One-Time) Burden
State SNAP Agencies
State SNAP agencies will have a one-time reporting burden of
communicating to SNAP households about the implementation of EBT cards
with chip and NFC technology. This burden comprises 53 responses
totaling 424 hours. FNA expects that this communication will, at a
minimum, take the form of a notice to each SNAP household. FNA
estimates that each State Agency will need to draft a notice and set up
an automated process to send communications out to each household. FNA
estimates that it will take a State Agency 8.00 hours to draft a notice
and set up the automated process for a total one-time burden of 424.00
hours (53 State Agencies * 8.00 = 424.00 total hours).
State SNAP agencies will also have a one-time reporting burden of
revising household training materials to reflect the additional
information required by the rule. FNA estimates that these revisions
would take the equivalent of 80.00 hours per State SNAP agency, for a
total one-time burden of 4,240.00 hours (80.00 hours per State SNAP
agency * 53 State SNAP agencies = 4,240.00 hours).
State SNAP agencies will have a one-time reporting burden to revise
all documentation and training materials to include information
regarding chip card technology and anti-fraud measures that will be
available to households. FNA estimates that these revisions would take
the equivalent of 80.00 hours per State SNAP agency, for a total one-
time burden of 4,240.00 hours (80.00 hours per State SNAP agency * 53
State SNAP agencies = 4,240.00 hours).
Finally, State SNAP agencies will have a one-time reporting burden
related to conducting staff training on the various changes in the
proposed rule and FNA estimates there will be 2,650 responses, with
approximately 50 State SNAP agency staff receiving training per agency.
FNA estimates that training would take approximately 4.00 hours per
staff member, for a total of 10,600.00 hours (4.00 hours * 50 staff *
53 State SNAP agencies = 10,600.00 hours).
In total, the one-time reporting burden for State SNAP agencies
would be 19,504.00 hours (424 chip card communications hours + 4,240.00
household training update hours + 4,240 anti-fraud documentation update
hours + 10,600.00 staff training hours = 19,504.00 total hours).
EBT Host Processors
Although four EBT host processors are currently operating, FNA has
been informed that one processor plans to end its EBT work soon, so we
are only including the three EBT host processors that will remain in
the market. Therefore, there will be 3 responses for this reporting
burden.
EBT host processors will have a one-time reporting burden for
making EBT system updates to provide detailed SNAP transaction history
and account activity history, provide balance inquiry validation,
comply with upcoming updates to the X9.58 technical specification for
chip and NFC support, and monitor unauthorized EBT terminal usage.
FNA estimates that adding this functionality and implementing the
updates would take approximately 160.00 hours per EBT host processor,
for a total start-up reporting cost of 480.00 hours (160.00 hours per
processor * 3 EBT host processors = 480.00 hours). Once the EBT host
processors add the functionality to their systems, the reporting
activities would be automated and would not impose an ongoing burden on
processors.
EBT host processors will also incur a one-time reporting burden for
developing a process to monitor and block potential unauthorized
terminal usage. This will require 3 responses, one for each of the EBT
host processors. FNA expects that developing a process to monitor
terminals that exhibit certain patterns indicative of trafficking will
take the equivalent of a three-week sprint for each EBT host processor,
for a total of 360.00 reporting hours (40.00 hours * 3 weeks = 120.00
hours; 120.00 hours * 3 EBT host processors = 360.00 total one-time
reporting burden hours).
Households
SNAP households will have a one-time reporting burden related to
the activation of chip-enabled cards. FNA estimates that it will take
households 5 minutes to activate a chip card, for a total reporting
burden of 2,249,365.40 hours (22,493,654 households * 0.10 hours =
2,249,365.40 hours.)
FNA estimates that households will have a burden to review the
State agency notice regarding chip card implementation. FNA estimates
that 80 percent of households (22,493,654 households * 0.8 =
17,994,923) will review this notice. FNA estimates that it will take
households 5 minutes to review. In total, FNA estimates this burden to
be 1,799,492.32 hours (17,813,637 households * 0.10 hours =
1,799,492.324 hours.)
FNA estimates that there will be a burden for households
experiencing homelessness to travel to a local office and to wait to
obtain a new chip card. SNAP Quality Control data for FY 2022 estimated
that 5.6% of the SNAP caseload experiences homelessness. FNA also
estimates that not all households, approximately 50 percent,
experiencing homelessness will not need to visit a local office to
obtain a new chip card. As there are 22,493,654 households, 5.6% equals
1,259,644. Half of 1,259,6441 households equals approximately 629,822
households that may need to travel to a local office to obtain a chip
card. FNA estimates the travel and wait burden for these households to
be one hour, which would bring the total burden hours to households
experiencing homelessness to 629,822 hours.
In total, FNA estimates that the total one-time household burden
will be 4,704,463.72 hours (4,453,409.20 hours to review household
training materials that now include chip card activation and anti-fraud
measures + 2,249,365.40 hours to activate a chip cards and 629,822
hours for households experiencing homelessness to travel to a local
office for a new card.).
[[Page 66971]]
Retailers
Finally, online SNAP retailers will have a one-time reporting
burden of removing capabilities for balance inquiry and receipts with
account balances displayed from their online purchasing interfaces. To
implement the change, internet retailers will need to update their
ordering web page to remove the balance inquiry functionality and
adjust the method of receipt. Currently, 116 SNAP retailers are, or are
in the process to become, online SNAP retailers as direct integrators,
operating their own online purchasing platform. There are currently 29
eCommerce providers total, including those that do not have a retailer
who has gone live with SNAP Online Purchasing yet. FNA estimates that
this one-time update to online purchasing will take both the direct
integrators and eCommerce providers approximately 40.00 hours each, for
a total of 5,920.00 hours ((116 direct integrators + 29 eCommerce
providers) * 40.00 hours = 5,920.00 hours).
In total, the one-time startup burden of the proposed rule will be
an estimated 41,121,359.20 responses for a total of 4,704,463.72 hours.
Ongoing Burden
EBT Host Processors
EBT host processors will also have an ongoing burden of monitoring
EBT terminal usage and blocking unauthorized terminals to ensure that
only authorized retailers can access the EBT system. Once the
monitoring process is set up, the EBT host processors will need to
monitor terminals on an ongoing basis and block unauthorized terminals
that they discover throughout the course of the monitoring. The
monitoring itself will be largely automated and not result in an
ongoing burden for EBT host processors. FNA estimates that blocking
terminals will take approximately one hour per month per EBT host
processor, for a total of 12.00 hours per processor per year, or 36.00
hours total per year for all EBT host processors.
State Agencies
This rule includes a burden to account for the ongoing distribution
of EBT related household training materials by each State agency. Per
regulations at 274.2(e), household training includes content that will
familiarize households with benefit issuance, benefit redemption, and
rights and responsibilities. FNA did not previously account for this
burden for the distribution of training to households and is including
it in this new information collection. FNA estimates that each year,
each household may receive some form of EBT training materials, which
are most often provided as a pamphlet or brochure that accompanies
their EBT card. FNA estimates that it would take a State three minutes
to hand out information in an office or send via mail. FNA also
estimates that this effort would take the equivalent of 626,862.90
total hours for State agencies (0.05 hours per State agency to
distribute materials to a household * 12,537,250 newly certified
households per year = 626,862.90 hours).
Households
FNA previously did not account for the ongoing annual burden on
households to review EBT-related household training materials which are
required to be provided by State SNAP agencies in regulations at 7 CFR
274.2(e). Per State-provided data, 12,537,250 households joined the
program in Fiscal Year 2025. Based on that number, FNA estimates that
each year eighty percent of households that join the program
(10,029,806) will spend five minutes reviewing EBT household training
notices in a year for a total ongoing reporting burden of 1,799,492
hours (10,029,806 * 0.10 hours = 1,799,492).
In total, the ongoing burden of the proposed rule will be an
estimated 22,567,100.40 annual responses and 1,629,879.54 hours.
Together, the one-time startup burden and ongoing burden are
63,688,459.60 responses and 6,334,343.26 hours.
One-Time Burden
State Agencies
Respondent Type: State Government.
Estimated Number of Respondents: 53.00.
Estimated Number of Responses per Respondent: 53.00.
Estimated Total Annual Responses: 2,809.00.
Estimated Time per Response: 172.00.
Estimated Total Annual Burden on Respondents: 19,504.00.
Businesses
Respondent Type: EBT Processors, Internet Retailers, and eCommerce
Providers.
Estimated Number of Respondents: 148.00.
Estimated Number of Responses per Respondent: 1.02.
Estimated Total Annual Responses: 151.00.
Estimated Time per Response: 240.00.
Estimated Total Annual Burden on Respondents: 6,280.00.
Households
Respondent Type: Individuals/SNAP Households.
Estimated Number of Respondents: 22,493,654.
Estimated Number of Responses per Respondent: 1.83.
Estimated Total Annual Responses: 41,118,399.20.
Estimated Time per Response: 0.11.
Estimated Total Annual Burden on Respondents: 4,678,679.72.
Ongoing Burden
Businesses
Respondent Type: EBT Processors.
Estimated Number of Respondents: 3.00.
Estimated Number of Responses per Respondent: 12.00.
Estimated Total Annual Responses: 36.00.
Estimated Time per Response: 1.00.
Estimated Total Annual Burden on Respondents: 36.00.
Households
Respondent Type: Individuals/SNAP Households.
Estimated Number of Respondents: 10,029,806.
Estimated Number of Responses per Respondent: 1.00.
Estimated Total Annual Responses: 10,029,806.
Estimated Time per Response: 0.10.
Estimated Total Annual Burden on Respondents: 1,002,980.64.
State Agencies
Respondent Type: State Government.
Estimated Number of Respondents: 53.
Estimated Number of Responses per Respondent: 424,409.
Estimated Total Annual Responses: 12,537,258.
Estimated Time per Response: 0.05.
Estimated Total Annual Burden on Respondents: 626,862.90.
Total Reporting Burden
State Agencies
Respondent Type: State Government.
Estimated Number of Respondents: 53.00.
Estimated Number of Responses per Respondent: 424,462.
Estimated Total Annual Responses: 12,540,067.
Estimated Time per Response: 172.05.
Estimated Total Annual Burden on Respondents: 646,366.9.
Businesses
Respondent Type: EBT Processors, internet Retailers, and eCommerce
Providers.
[[Page 66972]]
Estimated Number of Respondents: 148.00.
Estimated Number of Responses per Respondent: 2.02.
Estimated Total Annual Responses: 187.00.
Estimated Time per Response: 241.00.
Estimated Total Annual Burden on Respondents: 6316.00.
Households
Respondent Type: Individuals/SNAP Households.
Estimated Number of Respondents: 22,493,654.
Estimated Number of Responses per Respondent: 1.83.
Estimated Total Annual Responses: 51,148,205.20.
Estimated Time per Response: 0.21.
Estimated Total Annual Burden on Respondents: 5,681,660.36.
BILLING CODE 3410-30-P
Burden Table
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[[Page 66973]]
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BILLING CODE 3410-30-C
E-Government Act Compliance
The Department is committed to complying with the E-Government Act,
2002 to promote the use of the internet and other information
technologies to provide increased opportunities for citizen access to
Government information and services, and for other purposes.
List of Subjects
7 CFR Part 271
Food stamps, Grant programs--Social programs.
7 CFR Part 274
Food stamps, Grant programs--Social programs
Accordingly, 7 CFR parts 271 and 274 are proposed to be amended as
follows:
PART 271--GENERAL INFORMATION AND DEFINITIONS
0
1. The authority citation for part 271 reads as follows:
Authority: 7 U.S.C. 2011-2036.
0
2. In Sec. 271.2, revise the definition of Electronic Benefit Transfer
(EBT) Card to read as follows:
Sec. 271.2 Definitions.
* * * * *
Electronic Benefit Transfer (EBT) card means a method to access EBT
benefits issued to a household member or authorized representative
through the EBT system by a benefit issuer. This method may include an
on-line magnetic stripe card, an off-line smart card, a card with an
integrated electronic chip card capable of conducting transactions by
either being inserted into a card reader or via wireless Near Field
Communication (NFC) protocols, a contactless digital wallet with a
stored virtual card, or any other similar benefit access technology
approved by FNA.
* * * * *
PART 274--ISSUANCE AND USE OF PROGRAM BENEFITS
0
3. The authority citation for 7 CFR Part 274 continues to read as
follows:
Authority: 7 U.S.C. 2011-2036.
0
4. In Sec. 274.1:
0
a. Revise and republish paragraphs (a) and (b);
0
b. Revise and republish paragraphs (c) and (d); and
0
c. Revise and republish paragraph (g)(1)
The revisions, removals, republications, and addition read as
follows:
Sec. 274.1 Issuance system approval standards.
(a) Basic issuance requirements. State agencies shall establish
issuance and accountability systems which ensure that only certified
eligible households receive benefits; that Program benefits are timely
distributed in the correct amounts; and that benefit issuance and
reconciliation activities are properly conducted and accurately
reported to FNA. Issuance systems shall not rely on EBT cards which
conduct transactions solely with magnetic stripes as the method of
distributing benefits to certified eligible households.
(b) Reserved.
(c) Alternative benefit issuance system.
(1) If the Secretary, in consultation with the Office of the
Inspector General, determines that Program integrity would be improved
by changing the issuance system of a State, the Secretary shall require
the State agency to issue or deliver benefits using another method. The
determination of which alternative to use will be made by FNA after
consultation with the State agency. The cost of conversion will be
shared by the Department and the State agency in accordance with the
cost accounting provision of part 277 of this chapter.
(2) The cost of documents or systems which may be required as a
result of a permanent alternative issuance system pursuant to this
section shall not be imposed upon retail food firms participating in
the Program.
(d) Contracting or delegating issuance responsibilities. State
agencies may assign to others such as banks, savings and loan
associations, and other commercial businesses, the responsibility for
the issuance of benefits. State agencies may permit authorized
contractors to subcontract assigned issuance responsibilities.
(1) Any assignment of issuance functions shall clearly delineate
the responsibilities of both parties. The State agency remains
responsible, regardless of any agreements to the contrary, for ensuring
that assigned duties are carried out in accordance with this part and
with the SNAP EBT Operating Standards (see Appendix A to Part 274). The
State agency is strictly liable to FNA for all losses of benefits, even
if those losses are the result of the performance of issuance,
security, or accountability duties by another party. The State agency
shall include language in those contracts with other parties under
paragraph (d) of this section which holds those parties liable for
losses of benefits in the event of unchecked fraudulent activity or
similar negligence on the part of those parties.
(2) All issuance contracts shall follow procurement standards set
forth in part 277 of this chapter.
(3) The State agency shall not assign the issuance of benefits to
any retail food firm.
* * * * *
(g) * * *
(1) The State agency shall be responsible for the coordination and
management of the EBT system. The Secretary may suspend or terminate
some or all EBT system funding or withdraw approval of the EBT system
from the State agency upon a finding that the State agency or its
contracted representative has failed to comply with the requirements of
this section and/or Sec. 277.18 of this chapter, or with the SNAP EBT
Operating Standards at Appendix A to Part 274.
* * * * *
0
5. In Sec. 274.2:
0
a. Revise and republish paragraphs (e)(1) through (7);
0
b. Add paragraphs (e)(8) through (18);
0
c. Revise paragraph (f)(2)(i);
0
d. Add paragraph (f)(3) and;
0
e. Revise and republish paragraph (g).
The revisions and additions read as follows:
Sec. 274.2 Providing benefits to participants.
* * * * *
(e) * * *
(1) The timeframe in which households are to be given the
opportunity to participate in the program under paragraph (b) of this
section;
(2) The issuance schedule and availability date for households to
access their benefits;
(3) If a PIN is used, the appropriate utilization and security of
the PIN including PIN selection requirements
[[Page 66975]]
and restrictions, the need to not share the PIN with anyone outside the
household including retailers, the fact that State agencies and EBT
processors will never contact a household to ask for their PIN, the
need to change the PIN immediately if a household notes any
unauthorized charges or suspicious activity;
(4) Each household's responsibilities for reporting loss or damage
to the EBT card, and responsibilities for reporting fraud including
card skimming, card cloning, or other similar fraudulent methods of
benefit theft, including who to report them to, both during and outside
business hours, and information regarding card replacement including
any applicable fees as detailed in Sec. 274.6(b)(3). Information on a
24 hour hotline telephone number shall also be provided to each
household;
(5) Written materials and/or other information, including the
specific rights to benefits in an EBT system, shall be provided as
prescribed under Sec. 272.4(b) of this chapter for bilingual
households and for households with disabilities. This shall include the
statement of non-discrimination found in Departmental Regulation 4300-3
(available from the USDA, Office of Civil Rights). Written materials
shall be prepared at an educational reading level suitable for SNAP
households;
(6) Information on the signs or other appropriate information to
enable the household to locate and identify retailers equipped to
accept EBT cards;
(7) Information regarding retailer-initiated debit adjustments and
a household's rights to notice, fair hearings, and provisional credits.
The disclosure must also state where to call to dispute such an
adjustment, the timeframe in which a dispute must be received, and how
to request a fair hearing;
(8) The right to, and timeframe in which, a household can request a
credit adjustment to their benefit account as defined in paragraph
(g)(2)(i) of this chapter. The training must also include the timeframe
in which a household is due a response;
(9) Information regarding the expungement of benefits detailed in
paragraph (i)(1)(i) of this chapter;
(10) Information regarding replacement of benefits destroyed in a
household misfortune as detailed in Sec. 274.6(a), including the
timeframe for a timely report;
(11) Eligible food that the program benefits may be used on as
defined in Sec. 271.2 of this chapter;
(12) The prior payment prohibition detailed in Sec. 274.7(b);
(13) Information on transaction limits as detailed in Sec.
274.7(c);
(14) Information regarding applicable container deposit fees;
(15) Common methods of EBT theft and how to avoid them, including
signs of phishing attempts and optional security-related account
features that may be enabled on an individual basis;
(16) Where information regarding rights and responsibilities as a
SNAP client can be found;
(17) Information regarding the expiration process of physical EBT
cards with expiration dates, including any actions needed by clients
and the process for replacing an expired card.
(18) Training on the prohibition of transaction fees, minimum
dollar amounts, and maximum limits on the number of transactions for
SNAP purchases.
(f) * * *
(2) * * *
(i) PIN assignment procedures shall be permitted in accordance with
industry standards and the SNAP EBT Operating Standards (see Appendix A
to Part 274) as long as PIN selection is available to clients if they
so desire and clients are informed of this option. Common PINs, such as
those defined in the SNAP EBT Operating Standards, are prohibited.
Selection of PIN via an Automated Voice Response (AVR) system or
similar customer service help desk shall be considered in accordance
with industry standards if, upon verification of at least two elements
of personally identifiable information, and without involvement of any
customer service representative, the system will prompt the client to
select a PIN of their choosing and then require re-entry of the PIN for
confirmation. The PIN must be encrypted upon entry into the system, the
client must have immediate or next-day access to their benefits using
the new PIN, and the State agency must accept liability for any losses
resulting from this procedure.
* * * * *
(3) SNAP State Agencies must issue cards in an inactive state,
requiring households to take actions to activate the new card as
required by the SNAP EBT Operating Standards (see Appendix A to Part
274).
* * * * *
(g) Adjustments.
(1) The State agency may make adjustments to benefits posted to
household accounts after the posting process is complete but prior to
the availability date for household access in the event benefits are
erroneously posted.
(2) A State agency shall make adjustments to an account to correct
an auditable, out-of-balance settlement condition that occurs during
the redemption process as a result of a system error. A system error is
defined as an error resulting from a malfunction at any point in the
redemption process: from the system host computer, to the switch, to
the third party processors, to a store's host computer or POS device.
These adjustments may occur after the availability date and may result
in either a debit or credit to the household. The household shall have
90 days from the date of the notice of a denied credit adjustment to
request a fair hearing.
(i) Credit adjustments. The State agency must act on all requests
for credit adjustments made by client households within 90 calendar
days of the error transaction. The State agency has 15 calendar days
from the date the household notifies it of the error to investigate and
reach a decision on an adjustment and move funds into the client
account. This timeframe also applies if the State agency or entity
other than the household discovers a system error that requires a
credit adjustment to the household. The household shall have 90 days
from the date of the notice of a denied credit adjustment to request a
fair hearing.
(ii) Debit adjustments. Upon receiving a timely debit adjustment
request, the State must validate the adjustment within 15 calendar
days.
(A) Standard procedure. Upon receiving a timely debit adjustment
request, the State shall place a hold on the household's account. If
there are insufficient benefits to cover the entire adjustment, a hold
shall be placed on any remaining balance that exists, with the
difference being subject to availability only in the next future month.
The household shall be given, at a minimum, adequate notice in
accordance with Sec. 273.13 of this chapter. The notice must be sent
after the adjustment request is validated, at the time the initial hold
is attempted on the household's current month's remaining balance,
clearly state the full adjustment amount, and advise the household that
any amount still owed is subject to collection from the household's
next future month's benefits. The household shall have 90 days from the
date of the notice to request a fair hearing. Should the household
dispute the adjustment and request a hearing within 15 calendar days of
the notice, a provisional credit must be made to the household's
account by releasing the hold on the adjustment balance within 48 hours
of the request by the household, pending resolution of the fair
hearing. If no request for a hearing is made within 15
[[Page 66976]]
calendar days of the notice, the hold is released on the adjustment
balance, and this amount is credited to the retailer's account. If
there are insufficient funds available in the current month to cover
the full adjustment amount, the hold may be maintained and settled at
one time after the next month's benefits become available. If the State
agency does not have the capability of placing a hold on benefits, the
State may choose to wait until the household has had 15 calendar days
from the date of the notice to debit the household's account. If the
State cannot verify the error within 15 days of the initial debit
request, the request must be denied.
(B) Alternative no-hold procedure. As an alternative procedure, the
State agency may instead choose to act on all requests for debit
adjustments to a household's account which are initiated within 15
calendar days from the date of the transaction involved, without
placing a hold on the household's account for the amount of the debit
adjustment. If so, the State agency must send a concurrent notice to
households upon receipt of the debit adjustment request after
validating the request, and provide them with 15 calendar days to
request a fair hearing before any action is taken to debit the
household's account. If a household disputes the requested adjustment
and requests a fair hearing within 15 calendar days, no further action
shall be taken to debit the household's account until the fair hearing
decision is rendered.
(3) The appropriate management controls and procedures for
accessing benefit accounts after the posting shall be instituted to
ensure that no unauthorized adjustments are made in accordance with
paragraph (j) of this section.
* * * * *
0
6. In Sec. 274.3:
0
a. Revise and republish paragraph (a);
0
b. Remove and reserve paragraph (b);
0
c. Revise the first sentence of paragraph (c)(3); and
0
d. Revise paragraph (e)(4).
The revisions read as follows:
Sec. 274.3 Retailer Management.
(a) Authorized Retailer Participation.
(1) All authorized retailers must be afforded the opportunity to
participate in the EBT system. An authorized food retailer shall not be
required to participate in an EBT system.
(i) Authorized participating retailers unable to redeem benefits
electronically when significant connectivity issues are present, such
as those resulting from disasters or system outages, shall be
accommodated by an alternative system (e.g., manual vouchers with
preliminary or delayed telephone verification) for redeeming Program
benefits from eligible SNAP customers. Prior to the transaction, the
retailer shall contact the EBT central computer or hotline number to
log the transaction and obtain an authorization number. If
authorization cannot be obtained before or at the time of purchase, the
retailer assumes the risk for sufficient benefits being available in
the household's account. Any alternate method cannot be burdensome on
either the household or the retailer, and it must include acceptable
privacy and security features.
(ii) Newly authorized retailers shall have access to the EBT system
within 2 weeks after the receipt of the FNA authorization notice.
However, whenever a retailer chooses to employ a third party processor
to drive its terminals or elects to drive its own terminals, access to
the system shall be accomplished within a 30 day period or a mutually
agreed upon time to enable the third party interface specifications and
any State required functional certification to be performed by the
State agency and/or its contractor.
(2) Authorized retailers shall be required to pay 100 percent of
the costs of acquiring, and arrange for the implementation of,
electronic benefit transfer point-of-sale and supplies, including
related services.
(i) Exceptions. Eligible farmers' markets, direct-marketing
farmers, military commissaries, non-profit cooperatives or
organizations, group living arrangements, treatment centers, and
prepared meal services (other than for-profit restaurants participating
in State-option restaurant programs) shall not be required to pay costs
essential to and directly attributable to EBT system operations as long
as the equipment or services are provided by the State agency or its
contractor and are utilized solely for SNAP. If Program equipment is
deployed under contract to the State agency, the State agency may, with
USDA approval, share appropriate costs with these retailers if the
equipment is also utilized for commercial purposes. The State agency
may choose to charge these retailers reasonable fees in the following
circumstances:
(A) Cost for the replacement of lost, stolen or damaged equipment;
(B) The cost of materials and supplies for POS terminals not
provided by the State agency;
(C) Telecommunication costs for all non-EBT use by retailers when
lines are provided by the State agency. In addition, State agencies may
remove phone lines from retailers in instances where there is
significant misuse of the lines;
(D) The cost of reinstalling State-provided EBT-only point-of-sale
equipment when POS equipment was removed due to FNA disqualification as
an authorized retailer and the retailer is authorized once again to re-
enter the program;
(E) De-installation fees to retailers who use State-provided EBT-
only point-of-sale equipment and then change to a third-party
processor.
(3) The State agency shall ensure that the EBT system provides
credits to the financial institution holding the accounts for retailers
or third party processors within two business days of the daily cut-
over period for retailer settlement. The cut-over period is the time of
day established by the system to define the end of a transaction day
for settlement and reconciliation.
(4) Interchange fees shall not apply to any EBT transaction, even
if the retailer uses commercial equipment provided by an independent
third-party processor to accept SNAP benefits.
* * * * *
(c) * * *
(3) Comply with all Program regulations (subchapter C of this
chapter) and SNAP EBT Operating Standards (see Appendix A to Part 274)
with respect to retailer participation in the Program and treatment of
SNAP households. * * *
* * * * *
(e) * * *
(4) Ensure that only currently authorized retailers can access the
system, requiring contracted EBT processors to actively monitor
transactions and remove access to the EBT system when unauthorized
terminal usage is encountered;
* * * * *
0
7. In Sec. 274.6:
0
a. Amend the introductory text of paragraph (b) by adding a sentence
following the last sentence of the paragraph;
0
b. Amend paragraph (b)(3) by adding a sentence following the last
sentence of the paragraph;
0
c. Revise paragraph (b)(4) by adding the words ``including PIN
requirements in the SNAP EBT Operating Standards (see Appendix A to
Part 274)'';
0
d. Amend the introductory text of paragraph (b)(5) by adding a sentence
following the last sentence of the paragraph;
0
e. Amend paragraph (b)(5)(i)(E) by adding the words ``and information
regarding any electronic contact methods available'' to the end of the
last sentence of the paragraph;
0
f. Amend the introductory text of paragraph (b)(6) by adding a sentence
[[Page 66977]]
following the last sentence of the paragraph; and
0
g. Revise paragraph (b)(6)(ii)(F) by adding the words ``and information
regarding any electronic contact methods available'' after the words
``including telephone number''.
The additions and revisions read as follows:
Sec. 274.6 Replacement issuances and cards to households.
* * * * *
(b) * * * The State agency shall act to accommodate households
containing homeless persons or victims of domestic violence who cannot
receive a replacement EBT card via mail.
* * * * *
(3) * * * The State agency shall not assess a fee for the
replacement of an EBT card with an expiration date that is being
replaced due to expiration, or an EBT card being replaced due to a
change in benefit delivery method.
(4) The State agency shall issue replacement cards and PINs in
accordance with Sec. 274.2(f) of the chapter, including PIN
requirements in the SNAP EBT Operating Standards (see Appendix A to
Part 274).
(5) * * * The State agency shall not consider an EBT card with an
expiration date that is being replaced due to expiration or due to a
change in benefit delivery method as counting towards this threshold.
(i) * * *
(E) * * *, and information regarding any electronic methods
available.
* * * * *
(6) * * * The State agency shall not consider an EBT card with an
expiration date that is being replaced due to expiration or due to a
change in benefit delivery method as counting towards this threshold.
(ii) * * *
(F) Provide contact information, including a telephone number or
information regarding any electronic contact methods available, should
the household have questions or concerns regarding the notice.
0
8. In Sec. 274.7:
0
a. Revise and republish paragraph (d); and
0
f. Add paragraph (k).
The revisions and additions read as follows:
Sec. 274.7 Benefit redemption by eligible households.
* * * * *
(d) Access to balances. States must establish standards covering
client access to platforms such as client websites, EBT cardholder
portals, or mobile applications that clearly inform clients of
balances, features, security options, and other services available for
their EBT account.
(1) Households shall be permitted to determine their SNAP account
balances without making a purchase or standing in a checkout line.
However, retailers shall not be required to provide a balance inquiry
function through online sales channels.
(2) The State agency shall ensure that the EBT system is capable of
providing a transaction history for a period of up to 12 calendar
months to households upon request.
(3) Households shall be provided receipts at the time of
transaction in accordance with Sec. 274.8(b)(7).
(4) The State agency shall ensure that balance inquiries made via
an Interactive Voice Response system are validated by entry of
additional secure information such as a card security code (CSC).
* * * * *
(k) Participant-selected account options. The State SNAP agency
shall ensure that households are permitted the opportunity to elect or
remove specific benefit account options:
(1) Card freezing;
(2) Blocking of out-of-State transactions;
(3) Blocking of card-not-present transactions;
(4) Setting a transaction amount limit;
(5) Setting account activity alerts;
(6) Other future options subject to public comment and inclusion in
the SNAP EBT Operating Standards (see Appendix A to Part 274)
* * * * *
0
9. In Sec. 274.8:
0
a. Revise and republish paragraphs (a) and (b);
0
b. Add ``Automated Standard Application for Payments'' before and
parentheses around the word ``ASAP'' in paragraph (c)(1)(iii); and
0
c. Revise paragraph (d)(1)(ii).
The revisions and additions read as follows:
Sec. 274.8 Functional and technical EBT system requirements.
(a) Functional requirements. The State agency shall ensure that the
EBT system is fully compliant with all Federal regulations as well as
the SNAP EBT Operating Standards (see Appendix A to Part 274), and is
capable of performing the following functional requirements prior to
implementation:
(1) Authorizing household benefits.
(i) Issuing and replacing EBT cards to eligible households;
(ii) Permitting eligible households to select a personal
identification number (PINs) at least four digits in length which
complies with the PIN requirements in the SNAP EBT Operating Standards
(see Appendix A to Part 274);
(iii) Establishing benefit cards and accounts with the central
computer database;
(iv) Maintaining the master household issuance record file data and
current authorization information;
(v) Training households and other users in system usage;
(vi) Authorizing benefit delivery;
(vii) Posting benefits to each household's account for regular and
supplemental issuances;
(viii) Providing households with access to information on benefit
availability;
(ix) Ensuring the privacy of household data and providing benefit
and data security;
(x) Inventorying and securing accountable documents; and
(xi) Zeroing out benefit accounts and other account authorization
activity.
(2) Providing food benefits to households.
(i) Verifying the identity of authorized households or authorized
household representatives at issuance terminals or POS;
(ii) Verifying the PIN and/or PIN off-set, primary account number
(PAN), terminal identification number, card security code (CSC) for
card-not-present transactions, card expiration date for card-not-
present transactions, and retailer identification number;
(iii) Determining the sufficiency of the household's account
balance in order to debit or credit household benefit accounts at the
point of sale;
(iv) Sending messages authorizing or rejecting purchases;
(v) Providing back-up purchase procedures when the system is
unavailable;
(vi) Ensuring that benefits are available and carried over from
month-to-month.
(vii) Responding to issuance problems in a timely manner.
(3) Crediting retailers and financial institutions for redeemed
benefits.
(i) Verifying electronic transactions flowing to or from
participating retailers' bank accounts;
(ii) Creating and maintaining a file containing the individual
records of EBT transactions;
(iii) Totaling all credits accumulated by each retailer;
(iv) Providing balance information to retailers or third party
processors from individual POS terminals, as needed;
(v) Providing each retailer information on total deposits in the
system on a daily basis;
[[Page 66978]]
(vi) Preparing a daily tape in a National Automated Clearinghouse
format or other process approved by FNA with information on benefits
redeemed for each retailer and in summary;
(vii) Transmitting the ACH tape to a financial institution for
transmission through the ACH or other method approved by FNA;
(viii) Transferring the information on the ACH tape or other
process approved by FNA containing daily redemption activity of each
retailer to the FNA Minneapolis Computer Support Center at least once
weekly. Transmittal may be by tape, disc, remote job entry or other
means acceptable to FNA.
(4) Managing retailer participation in accordance with Sec.
274.3(e).
(b) Performance and technical standards. The State agency shall
ensure that EBT systems comply with the X9.58 technical specification,
the ISO 8583 technical specification, the ISO 7812 technical
specification, and the SNAP EBT Operating Standards (see Appendix A to
section 274) in the areas of system processing speeds, system
availability and reliability, system security, system ease-of-use,
minimum card and terminal requirements, performance bonding, and a
minimum transaction set.
(1) System processing speeds.
(i) For leased line systems, 98 percent of EBT transactions shall
be processed within 10 seconds or less and all EBT transactions shall
be processed within 15 seconds. Leased line systems rent
telecommunications carriers specifically to connect to the central
authorizing computer. For dial-up systems, 95 percent of the EBT
transactions shall be processed within 15 seconds or less and all EBT
transactions shall be processed within 20 seconds or less. Dial-up
systems utilize existing telecommunications lines to dial up and
connect to the central computer at the time of the transaction.
Processing response time shall be measured at the POS terminal from the
time the `enter' or `send' key is pressed to the receipt and display of
authorization or disapproval information. Third party processors, as
defined in paragraph (h)(5) of this section, shall be required by the
State agency to comply with the same processing response times required
of the primary processor.
(ii) The EBT system shall provide re-ports, as determined by the
State agency, that document transaction processing response time and
the number and type of problematic transactions that could not be
processed within the standard response time.
(2) System availability and reliability.
(i) The EBT system central computer shall be available 99.9 percent
of scheduled up-time, 24 hours a day, 7 days per week. Scheduled up-
time shall mean the time the database is available for transactions
excluding scheduled downtime for routine maintenance. The total system,
including the system's central computer, any network or intermediate
processing facilities and cardholder authorization processors, shall be
available 98 percent of scheduled up-time, 24 hours per day, 7 days per
week. Scheduled downtime for routine maintenance shall occur during
non-peak transaction periods. State certification procedures shall
determine whether intermediate processing facilities and cardholder
authorization processors are capable of complying with system
availability standards prescribed herein prior to permitting the
interface with the central computer system.
(ii) Reconciliation reports and other information regarding
problematic transactions shall be made available to the State agency by
the system operator, individual retailers, households or financial
institutions as appropriate. Reports on problematic transactions,
including inaccurate transactions shall be delineated by the source of
the problem such as card failure, POS terminal failure, interruption of
telecommunications, or other component failure. Errors shall be
resolved in a timely manner.
(3) System security. As an addition to or component of the Security
Program required of Automated Data Processing systems prescribed under
Sec. 277.18(m) of this chapter, the State agency shall ensure that the
following EBT security requirements are established:
(i) Storage and control measures to control blank unissued EBT
cards and PINs, and unused or spare POS devices;
(ii) Measures to ensure communication access control. Communication
controls shall include the transmission of transaction data and
issuance information from POS terminals to work-stations and terminals
at the data processing center. The following specific security measures
shall be included, as appropriate, in the system design documentation,
operating procedures or the State agency Security Program:
(A) Computer hardware controls that ensure acceptance of data from
authorized terminals only. These controls shall include the use of
mechanisms such as retailer identification codes, terminal identifiers
and user identification codes, and/or other mechanisms and procedures
recognized by the industry;
(B) Software controls, placed at either the terminal or central
computer or both, that establish separate control files containing
lists of authorized retailers, terminal identifying codes, and user
access and identification codes. EBT system software controls shall
include separate checks against the control files in order to validate
each transaction prior to authorization and limiting the number of
unsuccessful PIN attempts that can be made utilizing standard industry
practices before the card is deactivated;
(C) Communications network security that utilizes the Advanced
Encryption Standard (AES) algorithm to encrypt the PIN, at a minimum,
from the point of entry. Other security may include authentication
codes and check-sum digits, in combination with data encoded on the EBT
card such as the PIN and/or PIN offset, to ensure data security during
electronic transmission. Any of the network security measures may be
utilized together or separately and may be applied at the terminal or
central computer as indicated in the approved system design to ensure
communications control, and other levels of equivalent security may be
permitted subject to FNA waiver request and approval;
(D) Manual procedures that provide for secure access to the system
with minimal risk to household or retailer accounts. Manual procedures
may include the utilization of manager identification codes in
obtaining telephonic authorization from the central computer system;
requirements for separate entry with audio response unit verification
and authorization number; and/or the utilization of 24 hour hotline
telephone numbers to authorize transactions.
(iii) Message validation shall include but shall not be limited to:
(A) Message format checks for completeness of the message, correct
order of data, existence of control characters, number and size of data
fields and appropriate format standards as specified in the approved
system design;
(B) Range checks for acceptable date fields, number and valid
account numbers, purchase and refund upper limitations in order to
prevent and control damage to the system accounts;
(C) Reversal of messages that are not fully processed and recorded.
(iv) Administrative and operational procedures shall ensure that:
(A) Functions affecting an account balance are separated or dually
controlled during processing and when requesting Federal reimbursement
through a concentrator bank under the
[[Page 66979]]
provisions of paragraph (i) of this section. These functions may
include but are not limited to the set up of accounts, transmittal of
funds to and from accounts, access to files to change account records,
and transmittal of retailer deposits to the ACH network or other means
approved by FNA for crediting retailer bank accounts;
(B) Passwords, identity codes or other security procedures must be
utilized by State agency or local personnel and at data processing
centers, and be secured by multifactor authentication procedures;
(C) Software programming changes shall be dual controlled to the
extent possible;
(D) System operations functions shall be segregated from
reconciliation duties;
(v) A separate EBT security component shall be incorporated into
the State agency Security Program for Automated Data Processing (ADP)
systems where appropriate as prescribed under Sec. 277.18(m) of this
chapter. The periodic risk analyses required by the Security Program
shall address the following items specific to an EBT system:
(A) EBT system vulnerability to theft and unauthorized use;
(B) Completeness and timeliness of the reconciliation system;
(C) Vulnerability to tampering with or creating household accounts;
(D) Erroneous posting of issuances to household accounts;
(E) Manipulation of retailers' accounts such as creation of false
transactions or intrusion by unauthorized computer users;
(F) Capability to monitor systematic abuses at POS terminals such
as debits for a complete allotment, excessive manual issuances,
excessive balance inquiries, and multiple manual transactions at the
same time. Such monitoring may be accomplished through the use of
exception reporting;
(G) Tampering with information on the ACH tape or similar
information utilized in a crediting method approved by FNA; and,
(H) The availability of a complete audit trail. A complete audit
trail shall, at a minimum, be able to provide a complete transaction
history of each individual system activity that affects an account
balance. The audit trail shall include the tracking of issuances from
the Master File and Issuance File, network transactions from POS
terminals to EBT central computer database and system file updates.
(vi) The State agency shall incorporate the contingency plan
approved by FNA into the Security Program.
(4) System ease-of-use.
(i) For all system users, the State agency shall ensure that the
system:
(A) Minimizes the number of separate steps required to complete a
transaction;
(B) Minimizes the number of codes or commands needed to make use of
the system;
(C) Makes available clear and comprehensive account balance
information with a minimum number of actions necessary;
(D) Provides training and instructions for all system users
especially those persons with disabilities;
(E) Makes available prompts on POS terminals or balance only
terminals, where appropriate;
(F) Identifies procedures for problem resolution;
(G) Provides reasonable accommodation for the needs of households
with disabilities in keeping with the Americans with Disabilities Act
of 1990.
(H) Provides to clients seeking their transaction history via
online account management system or mobile account information
application the following information regarding each transaction:
(1) Transaction date and time;
(2) Transaction amount;
(3) Type of transaction (online or in person);
(4) Retailer identifying information, such as name and location,
excluding FNA retailer number.
(I) Provides clients utilizing online account management systems or
mobile account information applications with a history of account
activity including:
(1) Balance inquiries;
(2) Dates and times of changes to EBT card PIN;
(3) Changes to personal account information such as address, email
address, or telephone number;
(4) Other account changes such as enabling or disabling specific
account options
(ii) In addition to the requirements of paragraph (b)(4)(i) of this
section, the State agency shall ensure that retailers utilizing the EBT
system:
(A) Have available manual backup procedures;
(B) Can obtain timely information on daily credits to their banks;
(C) Have available deposit information in a format readily
comparable to information maintained in the store; and
(D) Have available instructions on resolving problems with
equipment and retailer accounts.
(5) Minimum card requirements.
(i) The address of the office where a card can be returned if found
or no longer in use should be printed on the card.
(ii) State agencies that implement the photo EBT card option in
accordance with paragraph (f) of this section must print on the EBT
cards the text ``Any user with valid PIN can use SNAP benefits on card
and need not be pictured.'' or similar alternative text approved by
FNA.
(iii) FNA reserves the right to require State agencies to place a
Department logo on the EBT card and/or sleeves or jackets.
(iv) EBT cards and/or sleeves or jackets shall not contain the name
of any State or local official. EBT informational materials shall not
indicate association with any political party or other political
affiliation.
(v) State agencies may require the use of a photograph of one or
more household members on the card. If the State agency does require
the EBT cards to contain a photo, it must establish procedures to
ensure that all appropriate household members or authorized
representatives are able to access benefits from the account as
necessary.
(vi) The primary account number (PAN) shall be printed on the rear
of each EBT card.
(vii) Other features as required by the SNAP EBT Operating
Standards (see Appendix A to Part 274), such as requirements regarding
card security code (CSC), expiration date, and PAN.
(6) POS terminals. POS terminals shall meet the following
requirements:
(i) Balance information shall not be displayed on the screen of the
POS terminal except for balance-only inquiry terminals;
(ii) PINs shall not be displayed at the terminal; and
(iii) PIN encryption shall occur from the point of entry in a
manner which prevents the unsecured transmission between any point in
the system.
(7) Transaction receipts. Households shall be provided printed or
electronic receipts at the time of transaction. At a minimum this
information shall:
(i) State the date, merchant's name and location, transaction type,
transaction amount and remaining balance for the SNAP account;
(ii) Comply with the requirements of 12 CFR part 205 (Regulation E)
in addition to the requirements of this section; and
(iii) Identify the SNAP households member's account number (the
PAN) using a truncated number or coded transaction number. The
households' name shall not appear on the receipt except when a
signature is required when utilizing a manual transaction voucher.
[[Page 66980]]
(8) Performance bonding. The State agency may require a performance
bond in accordance with Sec. 277.8 of this chapter or utilize other
contractual clauses it deems necessary to enforce the requirements of
this section.
(9) Minimum transaction set. At a minimum, the State agency shall
ensure that the EBT system, including third party processors and
retailers driving their own terminals, is capable of providing for
authorizing or rejecting purchases, refunds or customer credits, voids
or cancellations, key entered transactions, balance inquiries and
settlement or close-out transactions. The system must be capable of
completing this transaction set across State borders nationwide in
accordance with standards specified in paragraph (b)(10) of this
section.
(10) Interoperability. State agencies must adopt uniform standards
to facilitate interoperability and portability nationwide. The term
``interoperability'' means the EBT system must enable benefits issued
in the form of an EBT card to be redeemed in any State. The term
``portability'' means the EBT system must enable benefits issued in the
form of an EBT card to be used in any State by a household to purchase
food at a participating authorized retailer. The standards must include
the following:
(i) EBT system connectivity. State agencies are responsible for
establishing telecommunications links, transaction switching facilities
and any other arrangements with other State agencies necessary for the
routing of interoperable transactions to such other State EBT
authorization systems. State agencies are also responsible for
facilitating the settlement of such interoperable transactions and the
handling of adjustments. These connections need not be direct
connections between State authorization systems but may be facilitated
through agreements and linkages with other designated agents or third
party processors. All State agencies must agree to the timing and
disposition of disputes, error resolution, and adjustments in
accordance with Department regulations at Sec. 273.13(a) and Sec.
273.15(k) of this chapter and paragraph (f) of this section. State
agencies or their designated agents must draw funds from State SNAP
accounts for SNAP benefits transacted by that State's SNAP recipients,
regardless of where benefits were transacted.
(ii) Message format. Each authorization system must use the message
format required by the ASC X9.58 and ISO 8583 technical specifications,
in a version mutually agreed to between the authorization agent and the
party connected for all transactions. Each authorization system must
process each financial transaction as a single message financial
transaction, except for pre-authorized transactions and reversals,
processed as paired transactions.
(iii) Card Primary Account Number (PAN) Requirements. Track 2 on
each card shall contain the PAN. Each Government entity must obtain an
Issuer Identification Number (IIN) from the American Banker's
Association (ABA). The IIN should be included as the first six digits
of the PAN. The PAN must comply with the ISO 7812 technical
specification Each State agency must be responsible for generating,
updating, and distributing IIN files of all States to each retailer,
processor, or acquirer that is directly connected to the State's
authorization system. Each terminal operator that uses a routing table
for routing acquired transactions must, within 7 calendar days of
receiving an IIN routing table update, modify its routing tables to
reflect the updated routing information.
(iv) Third Party Processor requirements. Each Third Party Processor
or terminal operator must have primary responsibility and liability for
operating the telecommunications and processing system (including
software and hardware) through which transactions initiated at POS
terminals it owns, operates, controls or for which it has signed an
agreement to accept EBT transactions, are processed and routed,
directly or indirectly, to the appropriate State authorization system.
Each terminal operator must maintain the necessary computer hardware
and software to interface either directly with a State authorization
system or with a third party service provider to obtain access to one
or more State authorization systems. Each terminal operator must also
establish a direct or indirect telecommunications connection for the
routing of transactions to the State authorization system or to a
processor directly or indirectly connected to the State authorization
system.
(v) REDE File. The State agency must ensure that their EBT system
verifies FNA retailer numbers for all interstate transactions against
the National REDE file of all FNA EBT retailers to validate these
transactions.
(c) * * *
(1) * * *
(iii) Initiating and accepting reimbursement from the appropriate
U.S. Treasury account through the Automated Standard Application for
Payments (ASAP) system or other payment process approved by FNA. At the
option of FNA, the State agency may designate another entity as the
initiator of reimbursement for SNAP redemptions provided the entity is
acceptable to FNA and U.S. Treasury;
* * * * *
(d) * * *
(1) * * *
(ii) Re-presentation of manual vouchers shall not be permitted when
the EBT card, magnetic stripe, electronic chip, PIN pad, EBT card
reader, or POS terminal fails and connectivity to the central EBT
system is possible. Manual transactions shall not be utilized to extend
credit to a household via re-presentation when the household's account
balance is insufficient to cover the planned purchase.
* * * * *
0
9. After 274.8.
0
a. Add the Appendix A to part 274 Supplemental Nutrition Assistance
Program Electronic Benefit Transfer Operating Standards to read as
follows:
Appendix A to Part 274: Supplemental Nutrition Assistance Program
Electronic Benefit Transfer Operating Standards
(a) Supplemental Nutrition Assistance Program (SNAP) Overview
(1) The Supplemental Nutrition Assistance Program (SNAP) is the
largest nutrition assistance program in the United States.
(2) SNAP is a means-tested program, which means low-income
households must apply to participate and will only be accepted if
they meet the Program's income and asset requirements. If they meet
those requirements, their application is approved, and they become a
SNAP household (a SNAP household can include one or more people). 7
CFR 273.1, 7 CFR 273.8-273.11.
(3) SNAP households receive a monthly benefit, which can (1)
only be used to buy SNAP-eligible foods, and (2) only be used at
SNAP-authorized retailers. 7 CFR 274.7(a), 7 CFR 278.2(a).
(4) SNAP benefits are provided to SNAP households via an
Electronic Benefits Transfer (EBT) card. The EBT card is a method to
access benefits issued to a household member or authorized
representative (the SNAP household) through the EBT system by a
benefit issuer (the SNAP State agency, through its EBT host
processor). This EBT card may be a magnetic stripe card; a card with
an integrated electronic chip capable of conducting contact or
contactless payments, by either being inserted into a card reader or
via wireless Near Field Communication (NFC) protocols; a digital
wallet with a stored virtual EBT card; or any other similar benefit
access technology approved by FNA.
(5) An EBT system is an electronic payment system that allows
SNAP households to pay for food using their SNAP benefits via an EBT
card when shopping at a SNAP-authorized retail store. When a
[[Page 66981]]
participant makes such purchases, their SNAP EBT account is debited
to reimburse the store for the food they bought. SNAP benefits are
issued from, and stored in, a central database, which is maintained
and managed by a State or its contractor EBT processor. Such EBT
systems use electronic funds transfer technology for the delivery
and control of SNAP benefits and other public assistance benefits.
(6) EBT is used in all 50 States, the District of Columbia,
Puerto Rico, the Virgin Islands, and Guam. EBT has been the sole
method of SNAP issuance in all States since June of 2004.
(b) Operating Standards Purpose
(1) The purpose of this document is to provide Operating
Standards for SNAP EBT systems. These standards have been published
as an appendix to Part 274 of the Code of Federal Regulations.
(2) The SNAP EBT operating standards are the rules that govern
SNAP EBT systems and EBT transaction processing methods. This
includes establishing system requirements, establishing the systems
themselves, maintenance, operation, and interaction with such
systems, transaction processing, documentation, and reporting. The
Operating Standards define the technical environment of EBT systems,
define the responsibilities of each entity that interacts with a
SNAP EBT system, and help to ensure those systems operate
consistently, successfully, and securely; and provide a framework
for mitigating errors and assigning liabilities.
(3) The SNAP EBT Operating Standards are modeled on operating
rules used by debit, ATM, and credit card payment networks.
Ultimately, the standards will ensure consistency in program
experiences for all SNAP households and SNAP-authorized retailers,
reflect ongoing advancements made in the consumer payment industry,
and safeguard SNAP program integrity.
(4) Legislative and Regulatory Authorities for SNAP EBT
Operating Standards
(i) All State Agencies and SNAP EBT systems must comply with all
applicable SNAP legislation, regulations, policies, and guidelines,
including this document.
(ii) This Operating Standards document is created under the
rulemaking authority authorized in the Food and Nutrition Act of
2008, as amended (7 U.S.C. 2011-2036), and the Consolidated
Appropriations Act, 2023 (Pub. L. 117-328).
(iii) SNAP legislative requirements can be found in the United
States Code (U.S.C.), at 7 U.S.C. 2011-2036d (the Food and Nutrition
Act of 2008, as amended).
(iv) SNAP regulations can be found in the Code of Federal
Regulations (CFR), at 7 CFR 271-283 (Title 7, Subtitle B, Chapter
II, Subchapter C). These Operating Standards focus primarily on EBT
issuance regulations that can be found at 7 CFR 274.
(v) Additionally, Regulation E, at 12 CFR 1005 plays a role in
governing SNAP EBT Operating Standards (Title 12, Chapter X, Part
1005 Electronic Fund Transfers).
(vi) FNA also issues SNAP policy memoranda, technical
assistance, and other guidance on an ongoing basis on the FNA
Documents & Resources page of the FNA website.
(vii) EBT transaction message specifications follow the X9.58
standard. That standard is established by ANSI's Accredited
Standards Committee X9. ANSI is the American National Standards
Institute, the accredited organization responsible for developing
technical standards, including exchanging EBT financial transaction
messages. The published standard is available on the American
National Standards Institute (ANSI) website.
(c) SNAP EBT Processing Overview
(1) SNAP EBT Systems Roles and Responsibilities
(i) This section describes entities that operate or interact
with SNAP EBT systems, including those involved in processing SNAP
transactions. Relevant entities in this environment include:
(A) SNAP Households: The person(s) who apply and are approved to
participate in SNAP, receive SNAP benefits, and use a SNAP EBT card
to purchase SNAP-eligible food. A SNAP household may authorize
people who are not part of the household to use its SNAP EBT card to
purchase food on its behalf. 7 CFR 273.1, 7 CFR 274.8(f)(10).
(B) SNAP-Authorized Retailers: A merchant that applies and is
authorized to accept SNAP benefits from SNAP households in exchange
for SNAP-eligible foods. SNAP-authorized retailers (``retailers'')
are the only places where SNAP households can use their benefits.
(C) The United States Department of Agriculture (USDA) Food and
Nutrition Administration (FNA): The government agency that
administers SNAP at the Federal/national level, in partnership with
SNAP State agencies, EBT host processors, SNAP-authorized retailers,
and other entities.
(D) SNAP State agencies: The governmental agency that
administers SNAP at the State and local level. SNAP State agencies
(State agencies or States) in all 50 States, the District of
Columbia, the Virgin Islands, and Guam operate statewide EBT systems
to issue SNAP benefits.
(E) EBT host processors: A contractor that builds and operates
SNAP EBT systems on behalf of States. This includes:
(1) Initial creation, maintenance, upgrading of EBT systems.
(2) Processing EBT transactions, managing individual SNAP
benefit accounts.
(3) Reporting and data management.
(4) Enabling and disabling retailers.
(5) End-of-day processing, settlement, reconciliation, and (in
some cases) providing Point-of-Sale (POS) devices to SNAP-authorized
retailers.
(6) Certification of Third-Party Processors.
(F) Gateway: An entity that routes EBT transactions from Third-
Party Processors to an EBT host processor based on the BIN of the
EBT card.
(G) Third-Party Processor (TPP): Financial institution that
receives EBT transactions from SNAP-authorized retailers and
acquirers and subsequently transmits those transactions to an EBT
gateway for further routing or directly to an EBT host processor for
transaction approval. SNAP State agencies and their contracted EBT
host processors must allow retailers to use EBT services provided by
TPPs and acquirers, and must provide interface specifications and
certification standards, in order for the TPPs to participate in the
EBT system per 7 CFR 274.3 (d).
(1) The TPPs have contractual agreements to connect to all
existing EBT processor systems, either directly or via gateways, in
order to facilitate the approval/denial transactions anywhere SNAP
is operated. TPPs typically provide EBT services and POS equipment
directly to larger retailers (such as those with many locations) who
may utilize other non-EBT services that the TPPs offer. Smaller
retailers who are unable to contract directly with a TPP instead may
rely on an acquirer to provide EBT services and POS equipment.
(H) Acquirer: A financial institution (or the agent of a
financial institution) that facilitates the authorization of SNAP
transactions by acquiring transaction-related data from SNAP-
authorized retailers and transmitting that data to a Third-Party
Processor for further routing. An acquirer may only need to contract
with a single TPP, as the TPP would handle subsequent routing to
gateways and EBT host processors.
(I) POS Service Provider: A financial institution (or its agent)
that provides retailers with the equipment and technology needed to
process SNAP benefits.
(2) SNAP EBT Transaction Flow
(i) This section describes how a SNAP EBT transaction flows
through the EBT system and related financial systems.
(ii) See Figure 1 for a visual representation of the SNAP EBT
transaction flow as of FY 2026. Please note that this figure is not
comprehensive, as there may be other participants not represented in
this figure, or participants who go by other names.
(iii) The left half of Figure 1 illustrates the flow of an EBT
transaction:
(A) After being approved to participate in the Program, a SNAP
household wants to buy SNAP-eligible food at a SNAP-authorized
retailer. To pay for the food, the SNAP household swipes, inserts,
or taps their EBT card--or uses another payment method, such as a
mobile wallet--at the retailer's POS device. This generates an EBT
transaction message, that is sent to the retailer's contracted TPP.
The EBT transaction message is electronic data that contains
information needed to process a transaction. The information
contained in the transaction message is defined by the ANSI X9.58
specification.
(B) The TPP receives the transaction message from the retailer's
POS device and forwards it to either a Gateway or directly to the
EBT host processor, depending on the capabilities of the TPP. If the
transaction message goes to a Gateway, the Gateway forwards it to
the correct EBT host processor, based on the BIN of the card.
(C) Upon receipt, the EBT host processor reviews the information
contained in the transaction message to ensure the transaction is
valid, as defined in the processor's Business Rules (which are
approved by the State and FNA). This includes:
(1) The SNAP household's Primary Account Number (PAN), to ensure
the card number is valid;
(2) The PIN;
[[Page 66982]]
(3) Whether there are sufficient benefits in the household's
account to cover the purchase;
(4) Whether the EBT card is statused/inactive;
(5) The retailer's FNA number, to ensure the retailer is
authorized to participate in SNAP); and
(D) The retailer's store type, to determine whether it is a
store type that has additional limitations/requirements (internet
retailers, restaurants, etc.). The processor will impose such
requirements as appropriate.
(E) The processor will then generate a transaction message
response to send back to the retailer's POS device, approving or
denying the transaction providing SNAP account balance information
and, if applicable, the denial reason). The processor sends FNA the
transaction data, per 7 CFR 274.4(b)(2) and the requirements
outlined in their contract with the State.
(F) To get to the retailer's POS device, the transaction message
response will follow the same path that was used to send the
original transaction message (i.e., through the TPP and then to the
retailer; or through a Gateway, then a TPP, and then to the
retailer).
(G) Once the transaction message response reaches the retailer's
POS device, the retailer provides approval/denial information and a
receipt to the SNAP household with the remaining account balance.
(iv) The right half of Figure 1 describes the settlement flow
(i.e., the transfer of funds which reimburses a SNAP-authorized
retailer for a SNAP transaction):
(A) TPPs request reimbursement from either the Gateway or the
EBT host processor (depending on how a particular transaction
message was routed).
(B) If a transaction message was routed through a Gateway, the
Gateway then requests reimbursement from the EBT host processor.
(C) Upon receipt of reimbursement requests from TPPs or
Gateways, the EBT host processor sends its own reimbursement request
to the Federal Reserve Bank (FRB), which authorizes reimbursement to
the EBT host processor from the appropriate SNAP State agency's
Letter of Credit.
(D) FRB then transfers the funds to the EBT host processor, and
the reimbursement funds flow down the chain and are settled--from
the host processor to the Gateway/TPP, and finally to the retailer.
Figure 1 Transaction Flow (as of FY 2026)
[GRAPHIC] [TIFF OMITTED] TP23OC26.005
(d) SNAP-Authorized Retailer Requirements
(1) SNAP-Authorized Retailers: EBT Card Acceptance
(i) The following are rules for SNAP-authorized retailers
regarding EBT card acceptance.
(A) SNAP EBT cards must be interoperable. This means that all
SNAP-authorized retailers must be able to accept SNAP EBT cards from
any of the 53 States and Territories that operate SNAP, in
accordance with interoperability standards specified in 7 CFR
274.8(b)(10).
(B) SNAP EBT cards must be presented at the time of purchase,
except for purchases from internet retailers.
(C) The SNAP household member (or their authorized
representative) must enter the Personal Identification Number (PIN)
associated with the card at the POS device.
(D) For SNAP online purchasing, the SNAP household member (or
their authorized representative) must key-enter the card number and
PIN. Once chip card technology is implemented, it will be a best
practice for each retailer or eCommerce provider to update their
online payment platform (website, app, etc.) to collect the card
expiration date and Card Verification Value (CVV)/Card Security Code
(CSC). PIN solution providers or others in the transaction flow may
also need to update their systems. Ecommerce refers to an online
sales platform that allows customers to make online purchases, such
as a website or mobile app.
(E) SNAP-authorized retailers must never store (i.e., maintain a
record of) a SNAP household's card number (unless tokenized), PIN,
expiration date, or CVV/CSC.
(2) SNAP-Authorized Retailers: EBT Training
(i) The following are the rules for SNAP-authorized retailers
regarding effective EBT training for employees (7 CFR 278.6(i)(2)):
[[Page 66983]]
(A) SNAP-authorized retailers must ensure that all managers and
employees whose work brings them into contact with SNAP benefits--or
who are assigned to a location where SNAP benefits are accepted,
handled, or processed--are effectively trained on the correct
acceptance and use of SNAP benefits.
(B) Such training must be designed to establish a level of
competence that ensures compliance with federal requirements.
(C) Training must include written, program-specific material,
such as SNAP regulations, relevant guidance issued pursuant to those
regulations (policy memoranda, fact sheets, training presentations,
etc.), and correct use of POS devices and related equipment.
(D) Training materials must clearly state that trafficking is
prohibited, as it violates the Food and Nutrition Act of 2008 and
SNAP regulations. Trafficking is the exchange or attempted exchange
of SNAP benefits for anything other than SNAP-eligible food.
(E) Employees at previously authorized SNAP retailers must be
trained within 30 days of being hired.
(F) After their initial EBT training, employees must
periodically have refresher training.
(ii) SNAP State agencies are required to provide training that
meets these requirements, including the provision of appropriate
written and program-specific materials. However, retailers have the
option to waive the State-provided training. In cases where a
retailer waives the State-provided training, the SNAP State agency
must direct retailers to confirm their waiver in writing (7 CFR
274.3(e)(7)).
(e) EBT Host Processor Requirements
(1) EBT host processors are contractors that build and operate
SNAP EBT systems on behalf of States. Processors are also sometimes
referred to as ``card issuers'' since they issue EBT cards to SNAP
households on behalf of SNAP State agencies.
(2) EBT Host Processors: Processing Standards
(i) Card processing standards create and enforce a level of
service for the SNAP EBT processing environment, ensuring that users
receive a consistent level of service, regardless of the technology
used or the entities involved. FNA establishes card processing
standards, in cooperation with entities that operate in the SNAP EBT
environment.
(ii) The following are card processing standards that all
processors must adhere to, and which must be incorporated into
contractual agreements with processors (or their agents) (7 CFR
274.8(b)):
(A) Processors must maintain computer hardware and software
necessary to interface directly with data processing facilities
required to accommodate transaction and file processing.
(B) Processors must establish direct or indirect
telecommunications connections to route transactions and to retrieve
and deliver files to/from other processors and TPPs.
(C) System uptime is required 99.9% of the time, 24 hours a day,
7 days a week. States may negotiate more rigorous uptime
requirements in their contracts with processors.
(D) Processors may schedule downtime for system maintenance,
repairs, upgrades, etc., provided the processor provides prior
notice to all network participants, including FNA.
(1) Outages must be scheduled to occur during non-peak
transaction periods.
(2) Scheduled outages must not be included when calculating
whether the monthly 99.9% system uptime requirement has been met.
(3) In the instance of emergency downtime, the processor must
promptly inform all network participants.
(E) Processors must initiate a response to a SNAP EBT
transaction request within two seconds from the time such a request
is received by the processor's system, 98% of the time, per month.
(1) Data transmission times between the processor and the
acquirer must not be included when calculating whether the monthly
98% transaction request response requirement has been met.
(F) No more than two in every 10,000 transactions processed by a
processor's system shall lead to an adjustment resulting from
processor error.
(G) Processors must ensure that SNAP transactions originate from
a SNAP-authorized retailer by validating the retailers against the
Retailer EBT Data Exchange (REDE) file.
(H) Processors must ensure their International Organization for
Standardization (ISO) message specifications are aligned with the
most recent version of the ANSI X9.58 standards.
(I) Processors must provide all required data, such as
redemption and transaction data, to FNA in accordance with the most
up-to-date file specifications.
(J) When updates are made to the ISO 8583 or ANSI X9.58
specification, or other applicable specifications, State agencies
shall ensure that EBT systems comply with the new version of the
specification within 180 days from the publication of the updated
specification.
(3) Issuer Identification Number (IIN)/Bank Identification
Number (BIN)
(i) Issuer Identification Numbers (IIN), formerly called Bank
Identification Numbers (BIN), are six-digit to eight-digit numbers
that identify the bank, financial institution, or other entity that
issued a card. IINs are issued by American Bank Association (ABA),
and are placed on credit, debit, and other types of payment cards
worldwide, including SNAP EBT cards. The ABA no longer issues six-
digit IINs and is moving towards adopting eight-digit IINs.
(ii) The first digit in an IIN is the Major Industry Identifier
(MII), which is determined according to the numbering scheme
specified in the ISO 7812--Part 1 standard.
(iii) Each SNAP State agency via their EBT host processor must
apply for and maintain its own IIN. The IIN is registered to the
SNAP State agency rather than their EBT host processor.
(f) TPP and Acquirer Responsibilities
(1) Each acquirer or TPP shall enter into an agreement with an
EBT Host Processor, gateway, or other relevant party, stating it
will comply with FNA Regulations and EBT technical specifications,
as outlined in ANSI X9.58. These EBT Operating Standards do not
negate any terms or conditions of TPP or acquirer agreements, as
long as the conditions of said agreement do not conflict with FNA
regulations. A TPP or acquirer may enter into agreements with more
than one EBT Host Processor, Gateway, or other connection point.
(2) Each acquirer must ensure that the POS terminals it owns,
operates, controls, or for which it has signed an agreement to
accept EBT transactions, must do so in accordance with FNA
regulations.
(3) Each TPP and acquirer must settle all authorized
transactions in accordance with FNA regulations and EBT Host
Processor standards.
(4) Only a retailer that has received authorization from FNA to
participate in SNAP may accept EBT cards for SNAP transactions. Each
acquirer for a retailer that seeks such participation must make
efforts to ensure EBT fraud is not occurring under their platform.
Each acquirer must promptly ensure that it does not process SNAP
transactions for a retailer following receipt of notice that
authorization for that retailer has been revoked, rescinded or
otherwise eliminated.
(g) Required EBT Transactions
(1) Minimum Transaction Set
(i) At minimum, every entity that interacts with the SNAP EBT
system is capable of processing the following SNAP EBT transactions:
(A) Authorizations and denials,
(B) Refunds,
(C) Voids or cancellations,
(D) Key-entered transactions,
(E) Settlement or close-out transactions, and
(F) Balance inquiries (does not apply to SNAP-authorized
internet retailers).
(ii) Each of these required transaction types is explained in
more detail below. State agencies must ensure that their EBT systems
are capable of completing this transaction set and be able to do so
in every State nationwide, in accordance with interoperability
standards specified in 7 CFR 274.8(b)(10).
(iii) Lastly, all SNAP EBT transactions are electronically
processed and recorded. FNA has access to all SNAP EBT transaction
records including the date, time, and dollar amount.
(iv) Authorization or Denial of SNAP Purchases: A SNAP household
selects SNAP-eligible food at a SNAP-authorized retailer and goes to
check out. The cost of the food items is totaled, and the purchase
price is displayed by the POS device. The EBT card is presented to
the POS device (inserted, tapped, swiped etc.), and the household
must enter their PIN. The POS device then processes the transaction.
(A) If the purchase is approved, the retailer must provide the
household with a receipt that shows the purchase and remaining SNAP
balance. The purchase amount is deducted from the household's SNAP
account and credited to the retailer's bank account generally within
two banking days.
(v) Refunds: Refund transactions are when SNAP benefits are
returned to a household's
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account. Refunded SNAP benefits must only be returned to the
household's SNAP card/account. Refunding SNAP benefits in any other
form (cash, gift cards, etc.) constitutes trafficking and would
subject both the retailer and household to sanctions.
(A) In-Person Refunds:
(1) In-person refund transactions are conducted on a retailer's
POS device.
(2) The SNAP households must enter their PIN to authorize the
refund.
(B) Internet Refunds:
(1) Internet refund transactions do not require SNAP households
to enter their PIN.
(2) Whole or partial refunds may occur automatically for
internet refunds. This may occur if an item is no longer in stock,
if the order is cancelled, if the SNAP household does not receive
all the items they ordered, or if an item is priced by weight and
the final weight (and therefore the price) is different from the
weight estimated at the time of purchase.
(3) If the original payment was a split tender transaction, the
refund will be issued to the card that was used to pay for the
refunded items.
(4) Refunds cannot occur after 90 days of the original
transaction.
(C) Refund transactions differ from reversals because they are
generally customer-initiated (except for automatic internet refunds)
rather than retailer-initiated.
(vi) Void Or Cancellation: Void or cancellation transactions are
used when an incorrect purchase amount is processed through a
retailer's POS device. The void/cancellation must be done
immediately after the purchase transaction and on the same POS
device.
(vii) Key-Entered Transactions: If a POS device cannot read an
EBT card, the SNAP household and retailer may conduct a key-entered
transaction. To do so, the retailer must manually enter the EBT PAN
into the POS device. Thereafter, the household must enter its PIN
into the POS device, to authorize and process the transaction. Key-
entered transactions must only be used as a last resort, when the
POS device cannot read the EBT card.
(A) States may request a temporary waiver from FNA to prohibit
some key-entered transactions as an EBT theft prevention measure.
(viii) Settlement: For SNAP-authorized retailers, this is the
transaction where they are paid for the SNAP benefits redeemed at
their store in exchange for food. Generally, SNAP-authorized
retailers must receive payment for approved SNAP transactions within
two business days of the transaction.
(ix) Balance Inquiries: Balance inquiries are used when a
household wants to check the amount of benefits currently in its
SNAP account.
(A) In-Person Balance Inquiries: In-person (or ``brick-and-
mortar'') SNAP-authorized retailers must provide SNAP households the
ability to conduct balance inquiries. The SNAP household must
present its EBT card to the POS device, enter their PIN, and follow
the prompts to obtain the account balance.
(B) Online Balance Inquiries: SNAP-authorized internet retailers
are not required to provide the ability to conduct balance
inquiries, and FNA strongly recommends they do not do so (7 CFR
274.7(d)(1)).
(1) However, internet retailers are allowed to provide balance
inquiries. If an internet retailer allows balance inquiries, FNA
requires them to do the following to mitigate fraudulent inquiries:
(i) Remove the ``guest checkout'' option from its online sales
platform (website, app, etc.).
(ii) Limit the number of times a SNAP household can change the
EBT card they are using to make purchases within a specific time
period.
(iii) Limit the number of balance inquiries a SNAP household can
conduct within a specific time period. FNA recommends a maximum of
two balance inquiries per hour.
(C) Balance Inquiries in Cardholder Portal/Mobile Apps: All SNAP
households have the ability to log into their State's online SNAP
cardholder portal to conduct balance inquiries. Processors in some
States also offer households the ability to conduct balance
inquiries in their mobile application. These platforms are protected
with a User ID and password functionality.
(D) Interactive Voice Response (IVR) SNAP Balance Inquiry
Requirements: Households can conduct balance inquiries by calling
the EBT host processer's IVR number. Previously, households were
able to conduct IVR balance inquiries by entering only their PAN.
However, that practice has proven highly susceptible to fraud.
(1) To prevent fraudulent balance inquiries by unauthorized
users, States must work with their processor to ensure that all
telephonic methods for conducting balance inquiries utilize an
approved form of verification (7 CFR 274.7(d)(4)). Verification
methods must use information only available to the household, such
as a CVV/CSC printed on the card, and must not use personally
identifiable information (PII).
(2) Reversals
(i) A reversal, sent to an EBT host processor by a retailer,
acquirer, or TPP, is a partial or complete nullification of the
effects of a previous transaction which cannot be processed as
intended, i.e., is undeliverable, is cancelled, or the previous
transaction has timed out waiting for a response. The voiding of a
transaction at the point of sale, when initiated by a retailer, is
processed using a reversal message. Reversals should be processed
per the ANSI X9.58 standards.
(ii) Reversals are a valid transaction type for internet
transactions and must be processed according to the standard
reversal specifications. Reversals must only be used in cases as
described above, with one exception for internet transactions: in
the event that a SNAP internet transaction occurs with mixed tender,
and the additional payment type (cash/credit/debit) was rejected,
the original SNAP transaction can be reversed so that the
transaction can be attempted again. PINs are not required in
reversal messages.
(iii) If the customer is unable to find a payment method with
sufficient funds to cover the balance, and the website needs to
cancel the original SNAP transaction, the retailer must submit a
reversal to their processor.
(3) Adjustments
(i) An adjustment is a change to the balance of a household's
SNAP benefit account, implemented by a State SNAP agency (and/or by
their contracted EBT host processor) in response to an incorrect
account balance caused by a system error during the redemption
process (7 CFR 274.2(g)). Adjustments may increase the balance of a
SNAP account (``credit adjustment'') or decrease the balance of an
account (``debit adjustment'').
(ii) A system error is an error resulting from a malfunction at
any point in the SNAP benefit redemption process, such as an error
made by a retailer's host computer or POS device, a TPP, the
Gateway, or processor. System errors should be rare. Adjustments
must only be used to correct system errors and must never be used to
correct a human error. Examples of system errors include:
(A) A State agency review of documentation shows that a
household's benefit account was charged a different amount than the
amount submitted by the retailer, or
(B) A charge submitted by a retailer to the EBT processor is
erroneously deducted from the wrong household's benefit account.
(iii) When investigating a potential adjustment, the State
should not rely solely on a retailer disputing a proposed credit
adjustment as the sole evidence to for rejecting that proposal. The
State must investigate the transaction(s) involved thoroughly, and
determine if a valid system error occurred, regardless of the
retailer's response to an inquiry.
(iv) Adjustments should not be utilized in response to household
reports of retailer errors. Adjustments can only be used to correct
system errors. Households must seek corrections to retailer errors
(via refund and returns, for example) with the retailers themselves.
Some examples of retailer errors (which are not true system errors)
follow:
(A) Retailer Errors (must be done as returns, NOT as
adjustments):
(1) A retailer clerk erroneously scans a single item multiple
times,
(2) A clerk erroneously charges a household for one type of food
item when a different type was purchased,
(3) A retailer charges a different amount for a SNAP item at the
register than was advertised,
(4) A retailer attempts to input a refund to a household's
benefit account, but erroneously charges a household a second time
for the same amount,
(5) A SNAP internet retailer delivers SNAP items that a
household has already paid for, but they arrive damaged or with
items missing,
(6) A client returns items accidentally purchased with SNAP
benefits, and/or
(7) A client is unhappy with the quality of the product they
received.
(B) Additionally, adjustments should not be used to replace
stolen SNAP benefits.
(v) SNAP Household-Initiated Adjustments
(A) In order to be timely, SNAP households must request
adjustments to their benefit account within 90 calendar days of an
alleged system error transaction (7 CFR 274.2(g)(2)(i)). Households
most often request
[[Page 66985]]
credit (i.e., upward) adjustments but may request debit (i.e.,
downward) adjustments. Household-initiated adjustment requests that
are made over 90 days from the date of an alleged error transaction
must be denied as untimely.
(B) If a household-initiated adjustment request is timely, the
SNAP State agency has 15 calendar days from the date the household
reports the alleged error to investigate the transaction(s)
involved, reach a decision, and either move funds into the
household's account or issue a written denial of the request to the
household (7 CFR 274.2(g)(2)(i)).
(C) Approvals:
(1) To approve a household-initiated adjustment request, the
State agency must determine that a system error occurred and
document that the system error was reviewed and verified. The State
agency must make this determination prior to notifying the SNAP-
authorized retailer involved and prior to adjusting the household's
benefit account.
(2) For credit adjustments, States must not give a provisional
credit to the household while the State is determining whether their
claim should be approved or denied.
(D) Denials:
(1) If the State cannot verify the household's claim that a
system error occurred, the State must deny the adjustment request.
(2) If the State denies a household-initiated adjustment
request, they must send the household a denial notice. This notice
explains the action being taken, the reason for the action, and fair
hearing rights, so the household can appeal the determination. The
denial notice must be sent by the 15th calendar day after the
adjustment was requested by the household.
(3) Households must be granted a fair hearing if the request for
hearing is submitted within 90 calendar days from the date of the
denial notice. If the 90-day adverse notice period ends on a weekend
or holiday, and a request for a fair hearing is submitted the next
business day after the weekend or holiday, the State agency must
consider the request timely.
(4) For credit adjustments, States must not give a provisional
credit to the household pending a fair hearing for a denied
adjustment request.
(vi) Retailer-Initiated Adjustments
(A) In order to be timely, SNAP-authorized retailers must submit
adjustment requests no later than 15 calendar days after an alleged
system error occurred (7 CFR 274.2(g)(2)(ii)). Retailers typically
submit debit (i.e., downward) adjustment requests to household
benefit accounts, seeking additional payment (which they would
receive upon settlement) related to an alleged system error, but it
is possible they may request credit (i.e., upward) adjustments as
well.
(B) To proceed with a debit adjustment request, the State must
first review relevant data/documents, maintain documentation of its
investigation, and validate that a system error did occur.
(C) The State has 15 calendar days from the date the retailer
reports the alleged error to investigate the transaction(s) involved
and reach a decision. If the State cannot validate that a system
error (not a retailer error) occurred, the State must deny the
request. In addition, if the State cannot validate the requested
debit adjustment within 15 calendar days of the request, the request
must be denied. The State (or their EBT processor) is not required
to notify households of adjustment requests that were initiated by
the retailer and subsequently denied if no hold was placed on the
household's account.
(D) States can choose between following the standard procedure
for debit adjustments (274.2(g)(2)(ii)(A)) or an alternative no-hold
procedure (274.2(g)(2)(ii)(B)):
(1) Standard procedure: If the State determines there is a
timely and valid request for a debit adjustment, the State may
choose to place a hold on the household's account in the amount of
the requested adjustment. If the State validates the adjustment
request and places such a hold, it must immediately notify the
household that it has done so.
(i) If there are insufficient benefits in the account to cover
the entire proposed adjustment, the State may also place a hold on
all or part of the next month's issuance, to make up the difference
(but only the next month's issuance).
(ii) If the household appeals the adjustment by requesting a
fair hearing within 15 calendar days of being notified, the State
must--within 48 hours--make a provisional credit to the household's
account (by releasing the hold on the adjustment balance), pending
resolution of the fair hearing. If no request for a hearing is made
within 15 calendar days of the notice, the hold is released on the
adjustment balance, and this amount is credited to the retailer's
account.
(2) Alternative No-Hold Procedure: Alternatively, the State
agency may instead choose to act on requests for debit adjustments
without placing a hold on the household's account. Under this
procedure, the State must first notify the household of the proposed
adjustment and then allow the household 15 calendar days to appeal
by requesting a fair hearing before implementing the adjustment. In
such cases, the State must not take any further action until the 15-
day window for appeal expires. If the household does timely request
a fair hearing, the State should not adjust the household's account
until the fair hearing decision is rendered.
(E) Household Notice: Household adjustment notices must:
(1) Clearly state the proposed full adjustment amount,
(2) The reason for the action, including documentation of the
system error,
(3) If the State places a hold, it must give the household
adequate notice regarding the details of the hold, and advise the
household that any amount owed, above and beyond the hold amount, is
subject to collection from the household's next month's benefits.
(4) Inform households that they have the right to request a fair
hearing within 90 days of the date of the notice.
(vii) State-Initiated Adjustments
(A) In cases where the State agency identifies a possible system
error, the State has 15 calendar days to investigate and, if
appropriate, adjust the household's account (7 CFR 274.2(g)(2)(i)).
If the State cannot validate that a system error occurred, they do
not need to notify the household or the retailer because the
adjustment was initiated by the State.
(B) If the State validates that a system error occurred and the
adjustment results in a debit (i.e., reduction) to a household's
account, the State must notify the household and allow them to
request a fair hearing.
(C) In cases where SNAP benefits are erroneously issued to a
household, the State agency may adjust benefits issued to household
accounts after the issuance process is complete, but prior to the
availability date for household access (7 CFR 274.2(g)(1)).
(h) Clearing, Settlement, and Reconciliation
(1) In general, clearing, settlement, and reconciliation
describe the processes through which different entities interact
with each other to pay amounts owed to each other for conducting and
processing EBT transactions.
(2) Clearing is when retailers send transaction information to
the SNAP State agency or the EBT host processor to request payment.
This can be done directly by the retailer or through their
contracted TPP or acquirer.
(3) Settlement processing is when a State or processor creates
and transmits a payment to a retailer's bank for approved, cleared
SNAP transactions.
(4) Reconciliation is the process States must follow to account
for all SNAP issuance and transaction activity. This is done to
ensure accuracy and consistency, and to identify and rectify any
discrepancies.
(5) Clearing EBT Transactions
(i) Retailers clear transactions by submitting SNAP claim files
containing transaction information. The standards for SNAP claim
file processing are as follows:
(A) Retailers must submit SNAP claim files each business day no
later than 48 hours after the date and time of the oldest
transaction in the file.
(B) Retailers may submit a single claim file for multiple store
locations. The retailer must identify the specific store where each
transaction occurred in the SNAP claim file using the numeric
identifier assigned by FNA.
(C) If the State or processor approves a retailer to submit a
corrected claim file or corrected transactions, the retailer must
submit the correction within 60 days of the date of the original
file submission, unless the State approves a longer timeframe.
(6) Settlement Processing
(i) The standards for settlement processing are as follows:
(A) The State must set a standard daily cut-off time for
transaction processing and inform retailers and TPPs about this cut-
off time.
(B) The State must ensure that retailers receive payment at
their financial institution for approved, cleared EBT transactions,
within two business days of the settlement day of the transaction.
The State, processor, TPP, or acquirer must pay retailers as soon as
payments are ready to be transmitted.
(C) The processor must request payment from the Federal Reserve
Bank. Then, the Federal Reserve Bank verifies the request and
[[Page 66986]]
sends an Automated Clearinghouse (ACH) payment file to the State's
bank account (which is managed by the processor) directing the bank
to pay the processor for all settled transactions.
(1) On behalf of the State, the processor directs its bank to
pay the first authorized downstream entity in the EBT system for all
authorized transactions that were processed by the entity on first
authorized downstream will be a processor. Downstream entities might
include TPPs and acquirers, who then pay further downstream
entities. The final downstream entity is the retailer.
(D) The processor is responsible for meeting the settlement
cutoff timeframe established by the State. When submitting
transactions for settlement to a TPP, the processor must provide a
standard settlement cutoff timeframe to the TPP. Any differences in
these settlement cutoff timeframes are the responsibility of the
processor.
(7) Reconciliation
(i) SNAP State agencies must account for all SNAP benefit
issuances and transactions through a reconciliation process.
Reconciliation must be conducted and records kept as follows:
(A) Reconciliation of SNAP benefits issued to household accounts
against benefits on the Issuance Authorization File;
(B) Reconciliation of individual household account balances
against account activities on a daily basis;
(C) Reconciliation of each retail store's SNAP transactions, per
POS terminal and in total to deposits on a daily basis;
(D) Verification of retailer's credits against deposit
information entered into the ACH network;
(E) Reconciliation of total funds entered into, exiting from,
and remaining in the system each day;
(F) Maintenance of audit trails that document the full cycle of
issuance, from benefit allotment posting to the State issuance
authorization file, through posting to POS transactions at
retailers, through settlement of retailer credits.
(i) End of Day Cut-Off and Processing
(1) The following are the rules for SNAP State agencies, EBT
host processors, retailers, and TPPs regarding end-of-day cut-off
and processing:
(i) Each SNAP State agency must designate a standard daily cut-
off time for SNAP EBT transaction processing by TPPs interacting
with the State's EBT system.
(ii) That cut-off time must not be earlier than 12:00 p.m.
(noon) local time at any POS device accepting SNAP EBT transactions
for the TPP.
(iii) Transactions conducted during a business day must be
settled on the next business day after the next cut-off time.
(iv) Most cut-off times are at 2:00 p.m. Central Time. For
example, transactions that occur before 2:00 p.m. on a Wednesday
will be settled on Thursday (the next business day). Transactions
that occur after 2:00 p.m. on a Wednesday will be settl
[…truncated; see source link]Indexed from Federal Register on October 23, 2026.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.