For decades, USDA’s Food and Nutrition Service (FNS) has attempted to combat fraud by retailers and beneficiaries in the Supplemental Nutrition Assistance Program (SNAP) with varying success. Fraud levels were dramatically reduced after FNS rolled out the Electronic Benefit Transfer (EBT) system and discontinued the use of paper food stamps more than fifteen years ago.
Most of FNS’s efforts to address SNAP retailer fraud have been based on the agency’s ALERT system. That “system” monitors SNAP transactions nationwide and flags transactions at convenience stores and smaller grocers. FNS uses its ALERT system, which lacks a proper evidentiary foundation, to charge retailers with trafficking based on unsupportable patterns of “suspicious” activity. A much smaller percentage of FNS’s trafficking charges are based on undercover investigations during which the retailer is alleged to have given the investigator cash in exchange for redeeming a higher amount of SNAP benefits.
Recently, however, FNS has embarked on a highly questionable new tactic that results in the permanent disqualification of numerous small retailers from the SNAP program. The agency has started charging retailers with trafficking after it entraps store clerks to commit an action they are not predisposed to do, and which often results in no benefit to the store. Here’s what FNS’s investigators do: they go to stores, tell clerks that they need cash, and see if they can obtain cash from the register. After the clerk refuses, the investigator tells them they can go to Sam’s Club, Costco, Walmart, or another large retailer and purchase cases of energy drinks and soda with their EBT card, bring those items back to the store, and sell them to them for cash. Shockingly, SNAP retailers in Buffalo, New York have reported that attractive female FNS investigators have aggressively flirted with clerks in an attempt to get these clerks to agree to purchase eligible food items purchased at other stores.
FNS then charges those SNAP retailers with trafficking – even when a store’s owners are not aware of what’s going on or when a clerk purchased those items for personal consumption. Since October 2020, FNS also refuses to provide SNAP retailers with copies of the investigator’s receipts or other evidence that the items were purchased with SNAP benefits. Instead, they advise stores to send a FOIA request; that is an exercise in futility because the agency no longer holds SNAP retailer proceedings in abeyance until the agency response to FOIA requests; FNS also rarely complies with the mandatory statutory time limits for compliance with FOIA requests. As a result, an administrative system that already is extremely lopsided in favor of FNS has tilted even further against retailers.
While current SNAP retailer data is not available because FNS has not posted its Fiscal Year 2020 report (despite that fiscal year ending nearly four months ago), data from prior years demonstrate that FNS permanently disqualified more than 90% of retailers it charged with trafficking and less than 5% of administrative appeals resulted in reversal and restoration of a store’s SNAP license. To make matters worse, most small SNAP retailers are immigrants, including many from the Middle East, South Asia, Korea, or China. As a result, FNS’s actions have a disparate impact on immigrant retailers, in violation of federal law and USDA’s anti-discrimination policies.
Hopefully, the new Biden administration, the return of Tom Vilsack as USDA Secretary, and new political appointees at FNS will result in prompt voluntary changes in how FNS administers its SNAP retailer system. The time is long overdue for comprehensive reform of this antiquated, discriminatory system that results in the permanent disqualification of many small retailers who get caught up in FNS’s overbroad net. If USDA fails to quickly institute changes, SNAP retailers’ best hope rests with Congress; whether the legislative branch will act before the next Farm Bill is enacted remains to be seen. In the interim, SNAP retailers need to alert their employees about FNS’s unfair and unethical new enforcement tactics.