[Code of Federal Regulations]

[Title 7, Volume 4]

[Revised as of January 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 7CFR278.5]



[Page 934-936]

 

                          TITLE 7--AGRICULTURE

 

    CHAPTER II--FOOD AND NUTRITION SERVICE, DEPARTMENT OF AGRICULTURE

 

PART 278_PARTICIPATION OF RETAIL FOOD STORES, WHOLESALE FOOD CONCERNS 

AND INSURED FINANCIAL INSTITUTIONS--Table of Contents

 

Sec. 278.5  Participation of insured financial institutions.



    (a) Accepting coupons. (1) Financial institutions that are insured 

by the Federal Deposit Insurance Corporation (FDIC) or financial 

institutions which are insured under the Federal Credit Union Act and 

which have retail food stores or wholesale food concerns in their field 

of membership may redeem coupons only from authorized retail food 

stores, meal services, and wholesale food concerns in accordance with 

the rules contained in this part and instructions of the Federal Reserve 

Banks. No financial institution may impose on or collect from a retail 

food store a fee or other charge for redemption of coupons that are 

submitted to the financial institution in a manner consistent with the 

requirements, except for coupon cancellation, for the presentation of 

coupons by the financial institution to the Federal Reserve banks. 

Coupons submitted to insured financial institutions for credit or cash 

must be properly endorsed in accordance with Sec. 278.4 of this part 

and shall be accompanied by a properly completed and signed redemption 

certificate. All verified and encoded redemption certificates accepted 

by insured financial institutions shall be forwarded with the 

corresponding coupon deposits to the Federal Reserve Bank along with the 

accompanying Food Coupon Deposit Document (Form FNS-521). In accordance 

with Federal Reserve requirements, the coupon deposit value entered on 

the Food Coupon Deposit Document must be equal to the actual value of 

coupons being deposited and to the total value of verified amounts 

encoded on the corresponding redemption certificates.

    (2) An insured financial institution shall verify the amount of the 

coupons being redeemed and record the amount in the designated space on 

the redemption certificate. In order to conform with Federal Reserve 

requirements, the verified amount shall be recorded in the appropriate 

field on the redemption certificate using Magnetic Ink Character 

Recognition (MICR) encoding. Redemption certificates accepted by insured 

financial institutions shall be forwarded with the corresponding coupon 

deposits to the Federal Reserve Bank along with the Food Coupon Deposit 

Document (Form FNS-521).

    (3) Redeemed coupons must be indelibly cancelled on the face of the 

coupon by the first insured financial institution receiving them. If the 

cancellation on the coupon face does not show the depositing 

institution's name or its routing symbol transit number, this 

identifying information must appear on the straps affixed to each bundle 

of coupons of like denomination. Deposits not meeting these cancellation 

requirements may be returned to the depositing institution for 

reprocessing. Retail food stores may not be required to cancel the 

coupons by the insured financial institution nor may the insured 

financial institution charge the retail food stores a fee or other 

charge for cancellation of coupons. A portion of a coupon consisting of 

less than three-fifths of a whole coupon may not be redeemed.

    (4) Insured financial institutions which are members of the Federal 

Reserve System, insured nonmember clearing institutions, and insured 

nonmember institutions which have arranged with a Federal Reserve Bank 

to deposit coupons for credit to the account of a member institution on 

the books of a Federal Reserve Bank may forward coupons directly to the 

Federal Reserve Bank. Other insured financial institutions may forward 

cancelled coupons through ordinary collection channels.

    (b) Role of Federal Reserve Banks. Federal Reserve Banks, acting as 

fiscal agents of the United States, will receive canceled coupons for 

collection as cash items from armed forces installations, member insured 

financial institutions of the Federal Reserve System, nonmember clearing 

insured financial institutions, and nonmember insured financial 

institutions which have arranged with a Federal Reserve Bank to deposit 

coupons for credit to the account of a member insured financial 

institution on the books of the



[[Page 935]]



Federal Reserve Bank, and will charge those items to the general account 

of the Treasurer of the United States.

    (c) FNS liability for losses. FNS shall not be liable for the value 

of any coupons lost, stolen, or destroyed while in the custody of an 

insured financial institution or for the value of coupons lost, stolen, 

or destroyed while in transit from an insured financial institution to a 

Federal Reserve Bank.

    (d) FNS use of coupons to detect violations. Regardless of any other 

provision in these regulations, coupons may be issued to, purchased by, 

or redeemed by persons authorized by FNS to use those coupons in 

examining and inspecting program operations, and for other purposes 

determined by FNS to be required for proper administration of the 

program. Coupons which have been so issued and used, as well as any 

coupons which have been issued under paragraph (g) of this section, or 

which FNS believes may have been issued, transferred, negotiated, used, 

or received in violation of this subchapter or of any applicable 

statute, shall at the request of FNS and on issuance of a receipt for 

them be turned over to FNS by the insured financial institution 

receiving the coupons, or by any other person to whom the request is 

addressed, together with any certificate(s) of redemption accompanying 

the coupons. Any coupons so requested shall not be eligible for 

redemption through Federal Reserve Banks or other collection channels. 

However, FNS may redeem coupons from any insured financial institution 

or person by payment of the face amount of the coupons upon 

determination by FNS that this direct redemption of coupons is 

warranted. FNS shall determine the proper disposition of any coupons 

held by FNS on completion of the examination or inspection in which the 

coupons were used. Claims or demands for unredeemed coupons surrendered 

to FNS may be mailed to the local FNS field office for the project area 

involved.

    (e) Selling coupons to stores for internal checks. FNS may sell 

coupons at face value to any authorized retail food store which wishes 

to use coupons to conduct internal checks of coupon transactions. The 

retail food store must submit a written request to FNS which shall 

include a certification that the store recognizes that its use of 

coupons will not affect FNS action to enforce program regulations and 

that the requested coupons will be used only for internal checks of the 

store's employees and only to uncover sales of items other than eligible 

foods. The request shall also include the name of the city or county in 

which the stores to be checked through the use of the requested coupons 

are located and the name and address of any outside agency with which 

the retail food store has or will have a contract to conduct checks of 

the store's employees using coupons. The request shall be directed to 

the Benefit Redemption Division, FSP, FNS, U.S. Department of 

Agriculture, 3101 Park Center Drive, Alexandria, VA 22302, and shall be 

accompanied by a check or money order made payable to the Food and 

Nutrition Service to cover the face value cost of the coupons requested. 

Coupons bought by retail food stores for use in internal checks may be 

later redeemed for full value in accordance with Sec. 278.4, and in 

redeeming those coupons, retail food stores are authorized to make the 

certification required for redemption.

    (f) Continued participation of households under investigation. Upon 

the written request of Federal, State, or local government agencies 

which have authority to investigate, and are investigating, suspected 

violations of Federal or State statutes concerning the enforcement of 

the Food Stamp Act or the regulations, the State agency may allow 

ineligible households to continue program participation. The State 

agency may allow the households to continue participation in the program 

until the earlier of (1) expiration of the period of 90 days after the 

request is received or any longer period which FNS, upon request of the 

State agency, may approve in a particular case, or (2) receipt of 

notification from the investigative agency that participation may be 

terminated or that the investigation has been completed. Regardless of 

any other provision of these regulations, FNS may not hold the State 

agency liable for the value of any coupons



[[Page 936]]



issued to households under this paragraph.



[Amdt. 136, 43 FR 43274, Sept. 22, 1978, as amended by Amdt. 257, 49 FR 

32538, Aug. 15, 1984; Amdt. 267, 51 FR 6514, Feb. 25, 1986; Amdt. 272, 

51 FR 12498, Apr. 11, 1986; Amdt. 288, 52 FR 11815, Apr. 13, 1987; Amdt. 

272, 52 FR 18198, May 14, 1987; Amdt. 356, 59 FR 29714, June 9, 1994; 

Amdt. 331, 59 FR 60062, Nov. 22, 1994]