if the payments are for a fixed amount, that amount must be specified.for contributions to a registered savings plan) for a parent company to take funds from the subsidiary) for a business' commercial activities like supplies, lease, etc.) the payor's authorization to withdraw funds from a specific account (a 'void' cheque can be requested to confirm the account information, but this isn't mandatory).the date of the agreement, and the customer's signature (on paper agreements).It’s possible that your financial institution has a template agreement that you want your clients to use.Īll agreements must contain mandatory elements (found in Appendix II of Rule H1): The agreement can be completed on paper or electronically (online or by telephone for example).įinancial institutions are responsible to review the forms and related processes that their clients wishing to offer PADs as a payment method are intending to use. Organizations also need to have an agreement, a payor’s PAD agreement, in place with their clients. Detailed information is available in Rule H1. There are mandatory elements that must be contained in that Payee Letter of Undertaking. In that agreement, your financial institution agrees to issue PADs on behalf of the biller and they, in turn, agree to follow rules that apply to PADs. To offer pre-authorized debits to their customers, an organization needs to have a contract in place (called a Payee Letter of Undertaking in Rule H1) with your financial institution. Recurring charges to credit cards are not considered PADs and aren’t covered by Rule H1. Payments Canada and its participant financial institutions have established terms and conditions found in Rule H1 for the processing of PADs to ensure proper authorization and protect against improper withdrawals. For example, this could be used to contribute to a registered savings plan. For example, a parent company can use cash management PADs to draw funds from an account of its subsidiary.įunds Transfer PADs are used by an individual to transfer funds from an account at one financial institution to an account at another financial institution. Personal PADs are automated recurring payments from a customers' bank account for the goods or services they purchased.īusiness PADs arrange payments for goods or services related to a business, for example, payments between franchisees and franchisors, distributors and suppliers, or dealers and manufacturers.Ĭash Management PADs transfer, consolidate or reposition funds between accounts held by a business or closely affiliated businesses at different financial institutions (FIs). Pre-authorized debits are sometimes called direct debit, pre-authorized chequing (PAC), pre-authorized withdrawals or pre-authorized payments (PAPs). PADs can also be used by an individual to transfer funds from a bank account to a Registered Retirement Savings Plan (RRSP), for example. It’s a great way to pay bills like a mortgage, utilities, and insurance premiums. Instead of waiting for its customer to send a payment, a company or financial institution is given permission to debit a customer’s bank account when the payment is due. Pre-authorized debits (PADs) are a convenient way to pay bills and make payments automatically.

Debit finance definition