SNAP Retailer Disqualification, Part 2: How to Respond to a SNAP Charge Letter

If you are reading this, you are probably a Supplemental Nutrition Assistance Program (SNAP) retailer who has recently received a Charge Letter from the United States Department of Agriculture (USDA). In Part 1 of this series, I briefly talked about what a Charge Letter is. I address what to do about it below.

There are three major possible consequences of a Charge Letter: (1) temporary suspension of participation in the SNAP program; (2) permanently disqualification from participation in the SNAP program; or (3) a civil-money penalty.

  • Suspension. The Charge Letter may provide that your store will be prevented from participating in the SNAP program for six months or more. It may not seem like forever, but it often is the difference between a store staying in business and going out of business;
  • Permanent disqualification. The most severe punishment the USDA hands out is also the one that tends to be most overused. If your store or you are permanently disqualified, you may never again own or operate a store in any state that involves an Electronic Benefit Transfer (EBT) machine. The permanent disqualification cannot be undone unless you appeal the decision;
  • Civil-money penalty. A fine of up to $59,000.00 instead of a suspension or disqualification.

Civil-Money Penalty
There is a ray of hope when you receive a Charge Letter. You can request a civil money penalty instead of a suspension. But you will need to take immediate action to satisfy the required criteria:

  • You must prove that your store has an effective, written, SNAP compliance policy. That means that your employee handbooks have guidelines about SNAP benefits, and the policies are updated regularly and dated.
  • You must prove that your store’s compliance policy was in effect before the violations were documented by USDA. You will need to have a written training program and training on how and when to accept EBT benefits.
  • You will also need to show that no owners or managers benefitted from and of the SNAP violations.

The USDA aggressively denies requests for civil-money penalties because if the owner fails to request it, or fails to meet the criteria, the owner is not allowed to do so later. But if you have the benefit of an attorney early on, you can at least apply for the civil-money penalty, and argue that you met these criteria. This gives you more leverage to negotiate later.

How to Respond to a SNAP Charge Letter

What is to be done?
As I stated in Part 1, most SNAP Charge Letters rely heavily on the USDA’s EBT Alert Retailer Transactions System (Alert). Alert records every EBT in every authorized retail store in the country. A fraud locator, using an EBT Alert Retailer Transactions System (Alert), supposedly can identify patterns in EBT transactions indicative of trafficking. Alert assigns a numeric score to each store based on the likelihood of trafficking. Stores with scores above a certain threshold are added to the USDA’s Watchlist. Analysts and investigators prioritize those stores on the list for reviews based on factors such as average transaction amounts that are supposedly excessive for that type of store.

Alert system is supposed to be merely used as a detection tool and it is supposedly what provides the basis for the USDA to open an administrative case, commence an investigation, or initiate an enforcement action against the store. And according to the rules, while Alert may identify a retailer for further investigation, the actual case of trafficking needs to be based on transaction patterns that cannot be explained based on the store size, layout, inventory, and other factors. Practically speaking, this means that the USDA inspects each store.

The Inspection
When you get near the end of the Charge Letter, and start reading about the inspection of your store, you will probably vaguely remember someone from the USDA coming by your store unannounced several months earlier. Because the inspector asked you few questions and only stayed an hour, you didn’t think much of it. Which is exactly how the USDA wants it. Of course, you cannot control when an inspector will visit your store, or whether he will do a competent job. What you can do is: document, document, document.

What is certain to happen, is that the inspector will latch onto the facts that favor the USDA and downplay, sidestep, or step over the facts that are in your favor. Typically, the inspectors focus on the size, layout, and inventory of the store to justify what amounts to a preconceived decision that the Alert system’s decision was correct in flagging your store.

Relying on the inspector’s report, your Charge Letter probably states that:

  • It would be difficult or impossible for the large purchases to be physically conducted in the time that they were in your store;
  • There is insufficient inventory to account for these types of large purchases; and
  • There is insufficient refrigeration or freezer space to account for the quantities of these purchases.

They will often ignore storage areas in your store that could account for a larger inventory.

It is not at all uncommon that they will come when the inventory is at its lowest. There are some other common inspector tricks that you should be aware of, including:

  • If you do not have carts in your store, seizing on that to state that the size of the purchases could not have been made;
  • Ignored SNAP eligible items that are expensive to account for the inventory, including formula, specialty sodas, sweets; and
  • Taking only limited pictures to justify the preconceived decision.

Of course (now that you are armed with this article), nothing prevents you or your attorney from documenting the inspection yourself, while the inspector is still there. Make no mistake, if you don’t document the evidence in your favor, no one will.

The Time is Short
You have 10 days to respond to a SNAP Charge Letter. The best approach is to provide evidence that the supposedly excessive or unusual transactions are typical based on the characteristics of your store and you customers. There tend to be a few key areas where you can provide evidence that shifts the frame that the USDA has attempted to place your store in: food bundles or bulk food stores; specialty or ethnic foods not available at nearby SNAP retailers; other attractions to your store that would account for larger and more frequent purchases; and geographical distances to other SNAP retailers or other reasons that your store draws a larger or more loyal clientele then similarly sized stores.

  1. Food bundles or bulk food.
    If your store sells food in bulk, or in bundles, or delivers food, tell that to the USDA. Especially during COVID, many people began buying food in bulk.
  2. Specialty or ethnic foods not available a nearby SNAP retailers.
    If your store offers ethnic or specialty foods (especially high-priced items), emphasize this. For instance, if you are the only market offering Hmong foods in the nearby area, that can account for larger purchases and people coming from longer distances to buy the product.
  3. Other attractions to your store that would account for larger and more frequent purchases.
    If there is some draw or connection to your store that leads people to shop more often at your store than others, As the old line from Reading Rainbow goes, “Don’t take my word for it…” Find Google reviews or other online sources that can show real people commenting about how important your store is. If your store has a lot of Google reviews, tell the USDA! Above all, emphasize what makes your store different from the typical store that would not be reflected in a computer algorithm.
  4. Geographical distances to other SNAP retailers and other special circumstances.
    If there is some geographical distance or barrier that accounts for people going to your store and not others, you will need to show that to the USDA as well. Maybe your store is in an immigrant neighborhood where most people do not drive, and getting to another SNAP market would require a car to travel that distance. There are many examples. The takeaway is: if you don’t document valid reasons for how people shop at your store, the government will assume the absolute worst.

What Next?
Unfortunately, after you respond to the Charge Letter, there is very little to do but wait, often for several months. At that point, USDA should either inform you that the investigation has closed or sends a SNAP Violation Letter. In Part 3, I will address what to do if you receive a SNAP Violation Letter.

Final Thoughts.
You are up against one of the most severe and uncompromising government agencies in the country. Unless you have experienced legal help every step of the way, your chances of staying in business are very slim. Please contact my assistant Tiffany Horne at (952) 746-2150 or [email protected] if you would like to discuss any issues with me surrounding the SNAP Program.

Stay tuned for the next installment in this series, addressing how SNAP retailers should respond to SNAP Violation Letters.

Click here to read SNAP Retailer Disqualification, Part 1: What to do when you receive a SNAP Charge Letter.