85. The overissuance “Demand Letter/Notice of Action”
- The demand letter (notice of action)
- When must the county send a notice of action?
- Who should get the notice of action?
The demand letter (notice of action)
Before the food stamps office can reduce a household’s food stamps benefits, or use any other method to collect an overissuance, it must send a timely and adequate notice of action to the household. [MPP § 63-801.431; -801.732; 7 C.F.R. §273.18(e)(3); see also, Bliek v. Palmer, 102 F.3d 1472 (8th Cir. 1997) (demand letter inadequate because it did not inform the recipient of the state's discretionary settlement authority to settle, adjust, compromise or deny recovery of all or part of the overpayments). NOTE: California's notices do not contain this language, because the state believes it suffices to write off administrative error claims 3 years after an initial grant reduction under the Lomeli case, even though this leaves out many others.] Courts have generally held that the agency must provide enough information to give the household a meaningful opportunity to contest the action. [See, e.g., Ortiz v. Eichler, 794 F.2d 889 (3d. Cir. 1986).]
So, what must be in the demand letter (notice of action)? First, the demand letter must inform the household about the overissuance, including::
- the type of overissuance (e.g., agency-caused error),
- how much the household owes;
- the reason for the claim;
- the period of time during which the claim accrued;
- how the amount was calculated (including a month by month breakdown; see ACL 11-26);
- any amount of allotment reduction or offset that reduces the claim; and
- a statement that any adult member in the household at the time the overissuance occurred is liable for it.
- A due date by which to arrange a repayment agreement, if grant allotment is not proposed, or if such reduction ceases.
Federal law only holds adult members responsible for the repayment of overissuances. [§63-801.1; 7 U.S.C. § 2022(a)(4).] Thus, the state may not recoup overissuance claims from benefits when the only remaining household members are minors. California DSS state hearing training notes, item 02-01-01A.
The letter must also advise the household about appeal rights including:
- the right to inspect and copy any relevant records without charge;
- the right to a fair hearing;
- the 90-day deadline to request a hearing;
- any free legal representation that is available; and
- there is no right to a new (second) hearing about the amount of the intentional program violation (IPV) after an IPV hearing decision establishes the amount.
[MPP § 63-801.431(a)-(c) & (g).]
In addition, the notice of overissuance must contain the budget (math) showing how the overissuance was calculated for each month. ACL 11-26.
If the household chooses installments, the payment schedule is to be negotiated with the state agency, but in IPV and inadvertent-error cases, the state may not agree to a payment schedule under which it would recover less than by allotment reduction. [7 C.F.R. § 273.18(g)(2)(v).] This means that alternative repayment plans are never a better option than allotment reduction.
The demand letter must also include information about the various ways the county can collect including:
- a phone number to call for more information;
- information on how and when the household can repay the debt; and
- various ways to repay including lump sums or installments.
[MPP § 63-801.431(d).]
(For related information, see the section of this guide about how the food stamp office collects overpaid benefits.)
In California, the demand notice of action includes payment options. [MPP §63-801.431(d).] This form will ask the family how it wants to pay back the overissuance — all at once, through recoupment, or with installment payments. The notice must also inform the household that if it does not respond to the demand by a specific date, its benefits will be cut or the claim may be sent to collection, including referral to the federal or state offset program, referral to a collection agency, and that the household may also be charged fees for processing. [Id.]
Federal law also requires that the letter inform the household that the state agency may reduce (compromise) the claim if it believes the household cannot repay it. [7 C.F.R. § 273.18(e)(3)(iv)(m); see Bliek v. Palmer, 102 F.3d 1472 (8th Cir. 1997) (demand letter inadequate because it did not inform the recipient of the state's discretionary settlement authority to compromise the action.] California’s Manual of Policies and Procedures (MPP) does not include this language about compromise authority. In practice, the only compromise California allows is for agency (“administrative”) errors.
If benefits are going to be reduced, the regulations provide that a second notice must be sent prior to the allotment reduction. [MPP § 63.801.732.] The notice must indicate the amount of the reduction and the availability of other methods or repayment. [MPP § 63-801.732.] Some overissuances are small enough that the food stamp office will not even send a demand letter, because it would cost too much to do so. (In California, the threshold is $35.)
When must the county send a notice of action?
The notice must be sent within three years of the occurrence of the overissuance for agency errors and inadvertent household errors. Federal law requires that a demand letter be sent by the end of the quarter (i.e., the three-month period) after the quarter in which the food stamp office discovered the overissuance. [7 C.F.R. § 273.18(d) (1).] But the Food and Nutrition Service (FNS) also allows states to set their own standards, so long as FNS approves them. [Id.; see also, MPP §§63-801.11, 801.442; ACIN I-03-02 (January 14, 2002), pp. 7-8.] The California Department of Social Services (CDSS) has interpreted this to allow recovery from months beyond those three years, namely, that overissuances due to intentional program violations are subject to collection for months as far back as six years prior to the date of discovery. [MPP § 63-801.321.]
If the food stamp office sends a demand letter for an overissuance, the recipient should look at the reason for the overissuance and its type, i.e., whether the claim of overpayment is based on an alleged intentional program violation (IPV), an inadvertent household error, or an agency error). The recipient should also check to see whether the food stamp office has correctly calculated the amount of the overissuance.
(For related information, see the section of this guide about how to determine what is the correct amount of a food stamp overissuance.)
Who should get the notice of action?
The county will mail the notice of action to the household or to a sponsor that is liable for their sponsored immigrant’s overissuance. [MPP §63-801.431, and -801.732.] Adult members of the household are liable for the overissuance. (See related information in the section about getting too many food stamps.) Arguably, a court also might find that due process requires that every adult who may be held jointly and severally liable for an overissuance be given separate notice of that overissuance. [See Food Resource and Action, "Guide to the Food Stamp Program," at 195 note 495.] A person not individually named or sent a notice can request a hearing if later collection attempts are made, as unless they received the notice, the 90 days to appeal should not have started. [MPP § 22-009.1]