Changes To The Canadian Payments Association Rules For Pre-Authorized Debits

Receiving payment for goods or services by directly withdrawing funds from a customer or client's bank account, a practice known commonly as a pre-authorized debit (a "PAD"), is an efficient and effective payment mechanism for many businesses. In Canada, the use of PADs is regulated by the Canadian Payments Association (the "CPA"), a not-for-profit association created in 1980 by the Canadian Payments Act (the "Act"),¹ and charged with establishing and operating national systems for the clearing and settlement of payments and other arrangements. The CPA carries out this mandate by bringing together representatives of CPA members and stakeholder groups to develop and implement rules that apply to the clearing and settlement of different types of payments between its member financial institutions, including PADs.² Rule H1 – Pre-Authorized Debits ("Rule H1") governs the use of PADs in Canada. The Act, and by extension the Rules, are binding on financial institutions