The overissuance Demand Letter / Notice of Action

The Demand Letter / Notice of Action (NOA)

Before the CalFresh office can reduce a household’s benefits, or use any other method to collect an overissuance, it must send a timely and adequate “Notice of Action” (NOA) to the household. [MPP § 63-801.431; § 63-801.732; 7 C.F.R. § 273.18(e)(3).] The agency must provide enough information to give the household a meaningful opportunity to contest the action. The demand letter must also state that the household has a chance to work out a payment plan in lieu of tax intercepts or other recoupment. [7 C.F.R. § 273.18(e)(3)(12)(k); MPP § 63-801.431(d), (j), (k); MPP § 63-801.732.]

So, what must be in the “demand letter,” this so-called 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 and the related budget “math” showing how the overissuance was calculated, with a month-by-month breakdown;
  • Any amount of allotment reduction or offset that reduces the claim;
  • A statement that any adult member in the household at the time the overissuance occurred is liable for it; and
  • A due date by which to arrange a repayment agreement, if grant allotment is not proposed, or if such reduction ceases.

[See MPP § 63.801.431(a), (f); 7 C.F.R. § 273.18(e)(3)(iv)(O); ACL 11-26.]

Federal law only provides that adult members of the household are responsible for the repayment of overissuances. [7 U.S.C. § 2022(a)(4); MPP § 63-801.1.] The CalFresh program may not recover overissuance claims from benefits when the only remaining household members are minors. [See, California Department of Social Services – State Hearing Division, Training Notes, Item 02-01-01A.

The letter must also advise the household about its 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) and (g).]

The CalFresh program can offset a household error underissuances owed to the household with overissuances by lowering the amount to be paid back to the county, or taking the entire underissuance to pay back all or part of the overissuance. [MPP § 63-801.313.] The state cannot do an offset when the overissuance is a result of administrative error. [See Lopez v. Espy, 83 F.3d 1095 (9th Cir. 1996) (referrenced in the Handbook section, after 63-801.313.)]   For intentional program violations (IPV), the offset cannot occur until the IPV is established. [MPP § 63-801.324.]  Note that 7 C.F.R. § 273.18(g)(3) was amended after the Lopez decision to allow offsets of underissuances and overissuances in administrative error cases.  Because of that change, it is uncertain whether Lopez remains good law.

If the household chooses installment as its method for repayment, 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 about how the CalFresh office collects overpaid benefits.)

In California, the “demand letter” notice of action includes payment options. [MPP § 63-801.431(d).] This form will ask the household 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 intercept programs, 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 or “compromise” the claim if it believes the household cannot repay it. [7 C.F.R. § 273.18(e)(3)(iv)(m); 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 compromise the action).] California’s Manual of Policies and Procedures (MPP) does not include this language about compromise authority. In practice, the only compromise the CalFresh program 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 and must also 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 county CalFresh office will not even send a demand letter, because it would cost too much to do so.  In California, the threshold is now $400.  [ACL 19-50.]

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 CalFresh 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, 63-801.442; ACIN I-03-02, 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 CalFresh 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, an inadvertent household error, or an agency-caused error. The recipient should also check to see whether the CalFresh office has correctly calculated the amount of the 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, 63-801.732.] Only adult members of the household are liable for repayment of the overissuance. (See related information in the section about getting too many CalFresh benefits.) A person not individually named or sent a notice can request a hearing if later collection attempts are made since, unless they received the notice, the 90 days to appeal should not have started. [MPP § 22-009.1.]