RULE H1
PRE-AUTHORIZED DEBITS(PADS)
2023 CANADIAN PAYMENTS ASSOCIATIONThis Rule is copyrighted by the Canadian Payments Association. All rights reserved, including the right ofreproduction in whole or in part, without express written permission by the Canadian Payments Association.
Payments Canada is the operating brand name of the Canadian Payments Association (CPA). For legal purposes wecontinue to use “Canadian Payments Association” (or the Association) in these rules and in information related torules, by-laws, and standards.

RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

TABLE OF CONTENTS
IMPLEMENTED ............................................................................................... 4
AMENDMENTS PRE-NOVEMBER 2003 ........................................................ 4
AMENDMENTS POST-NOVEMBER 2003 ..................................................... 4
PART I – GENERAL ........................................................................................ 6
GENERAL – INTRODUCTION ............................................................................................ 6
GENERAL – SCOPE............................................................................................................ 6
GENERAL – REFERENCES ................................................................................................ 6
GENERAL – APPENDICES ................................................................................................. 7
GENERAL – DEFINITIONS ................................................................................................. 7
GENERAL - RESPONSIBILITY AND LIABILITY ................................................................. 9
ACTING ON NOTICES OF CHANGE AND IDENTIFICATION MODIFICATION ADVICE .. 9PART II – PAYEE LETTER OF UNDERTAKING ........................................... 10
PAYEE LETTER OF UNDERTAKING – PERSONAL PADS AND BUSINESS PADS ........ 10
PAYEE LETTER OF UNDERTAKING – CASH MANAGEMENT PADS............................ 10
PAYEE LETTER OF UNDERTAKING – EXCEPTION ....................................................... 10

PART III – PAYOR’S PAD AGREEMENT ...................................................... 11
PAYOR’S PAD AGREEMENT - PERSONAL PADS AND BUSINESS PADS..................... 11
PAYOR’S PAD AGREEMENT – MEMBERS ..................................................................... 11
PAYOR’S PAD AGREEMENT – REQUEST ....................................................................... 12
PAYOR’S PAD AGREEMENT – EXEMPTION .................................................................. 12

PART IV – PAD AUTHORIZATION .............................................................. 12
PAD AUTHORIZATION – PAYOR’S APPROVAL REQUIREMENTS PERSONAL PAD,
BUSINESS PAD AND FUNDS TRANSFER PADS, GENERAL, TIMING, SPORADICFREQUENCY, ONE-TIME, AMOUNT, TOP-UPS OR ADJUSTMENTS, CASH
MANAGEMENT PADS...................................................................................................... 12
PAD AUTHORIZATION – CONFIRMATION REQUIREMENTS, WAIVER OR REDUCTION
OF CONFIRMATION PERIOD: PERSONAL PADS AND BUSINESS PADS ..................... 13
PAD AUTHORIZATION – PRE-NOTIFICATION REQUIREMENTS: PERSONAL PADS
AND BUSINESS PADS OCCURRING AT SET INTERVALS ............................................. 14
PAD AUTHORIZATION – EXCEPTIONS TO PRE-NOTIFICATION REQUIREMENTS:PERSONAL PADS AND BUSINESS PADS OCCURRING AT SET INTERVALS .............. 14

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RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

WAIVER OF PRE-NOTIFICATION OF CHANGES FOR ALL BUSINESS PADS ORPERSONAL PADS RECURRING AT SET INTERVALS, AS SET OUT IN THE PAYOR’SPAD AGREEMENTS.......................................................................................................... 14

PART V – PAD PROCESSING ...................................................................... 14
PAD PROCESSING – CODING, AFT PADS, PAPER PADS ............................................. 14
PAD PROCESSING – AUDIT TRAIL ................................................................................. 15

PART VI – DISHONOURED PADS ................................................................ 16
DISHONOURED PADS - TIME LIMITATION, RULE A4, DESIGNATION OF BRANCH,INCORRECT ACCOUNT INFORMATION, REPRESENTMENT, BRANCH OF RETURNOTHER THAN BRANCH OF DEPOSIT ............................................................................. 16

PART VII – REIMBURSEMENT AND RECOURSE ....................................... 16
REIMBURSEMENT AND RECOURSE – PERSONAL PADS, BUSINESS PADS AND
FUNDS TRANSFER PADS, TIME LIMIT, DECLARED CONDITIONS, REIMBURSEMENT
CLAIM, INTEREST CLAIMS, RECOURSE, CLAIM AFTER TIME LIMIT .......................... 16
REIMBURSEMENT AND RECOURSE – RECOURSE EXCEPTION: FUNDS TRANSFER
PADS, NO REIMBURSEMENT.......................................................................................... 18
REIMBURSEMENT AND RECOURSE – RECOURSE EXCEPTION: CASH MANAGEMENTPADS ................................................................................................................................. 18
REIMBURSEMENT AND RECOURSE – ABSENCE OF CONTRACT, REIMBURSEMENT,TIME LIMIT, CLAIM AFTER TIME LIMIT, INTEREST CLAIMS, APPLICATION OF
SECTIONS ......................................................................................................................... 18
REIMBURSEMENT AND RECOURSE – PAYEE OR MEMBER PAYEE DISPUTE ........... 19

PART VIII – FUNDAMENTAL CHANGES .................................................... 19
FUNDAMENTAL CHANGES – ASSIGNMENT OF PAYOR’S PAD AGREEMENTS
AND/OR PAYEE LETTERS OF UNDERTAKING – CHANGES TO PAYEE NAME .......... 19
CHANGES TO PAYEE NAME ........................................................................................... 19
NOTICE OF CANCELLATION / REVOCATION ................................................................ 20
TERMINATION IN ACCORDANCE WITH PAYOR’S PAD AGREEMENT OR
AUTHORIZATION AND NOTICE ...................................................................................... 20
CANCELLATION NOTICE................................................................................................. 20

PART IX – COMING INTO FORCE ............................................................... 21
IMPLEMENTATION / COMING INTO FORCE ................................................................. 21

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RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

IMPLEMENTED
April 15, 2002

AMENDMENTS PRE-NOVEMBER 2003
July 15, 2002, November 25, 2002, March 31, 2003

AMENDMENTS POST-NOVEMBER 2003
1. Amendments to reflect consistency with the new CPA Payment Items and ACSS
By-law, approved by the Board November 27, 2003, effective January 27, 2004.
2. Amendments made to Appendix III approved by the Board November 27, 2003,
effective January 26, 2004.
3. Amendments made as a result of a holistic review of the entire Rule by theSpecial Purpose Working Group on Pre-Authorized Debits, approved by the Board
February 21, 2008 and effective June 20, 2008. There will be a grace period
which shall end on February 28, 2010, in order to effect all of the changes
necessary to comply with the new Rule.
4. Minor amendments consistent with the holistic review of the entire Rule by theSpecial Purpose Working Group on Pre-Authorized Debits, approved by the Board
June 12, 2008, effective July 12, 2008.
5. Amendment to section 3 to add reference to Rule A1 and addition of note tosubsection 17(b). Approved by the Board June 12, 2008, effective September 2,
2008.
6. Amendments to accommodate the elimination of RIV’s in the clearing and toallow for the retention of Reimbursement Claim forms by the Drawee, approvedby the Board October 11, 2007, effective October 20, 2008.
7. Amendments to provide clarification surrounding the processing of Notice of
Change transactions. Approved by the Board June 16, 2010, effective August 16,
2010.
8. Consequential amendments to accommodate the use of ISO 20022 Message
Formats, approved by the board February 18, 2016, effective April 18, 2016.
9. Amendments to replace references to Standard 017 with the Canadian ISO 20022
Usage Guidelines, approved by the Board December 1, 2016, effective January 30,
2017.
10. Amendments made as a result of a holistic review of the entire Rule by the PreAuthorized Debit Working Group, approved by the Board May 13, 2022 andeffective October 3, 2022. There will be a grace period which shall end on March

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1, 2024 in order to effect all of the changes necessary to comply with the newRule.
11. Amendments to change the grace period end date in sections 1, 14, 33 and 34
from March 1, 2024 to December 31, 2023. For clarity, the amendments made to
the Rule on May 13, 2022 are replaced in their entirety by identical amendments
other than the grace period end date amendments as aforesaid. Amendments
were approved by the Board June 9, 2022 and are effective October 3, 2022.

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RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

PART I – GENERAL
General – Introduction
1.

a. This Rule outlines the procedures for the Exchange for the purpose of Clearing and
Settlement of every Pre-Authorized Debit. There are four categories of PADs:-

Business PAD,-

Cash Management PAD,-

Funds Transfer PAD, and-Personal PAD.

b. All provisions of this revised version of Rule H1 are in effect as of October 3, 2022
however, in accordance with sections 14 and 33, adherence will not be mandatory
until December 31, 2023.
General – Scope
2. This Rule applies to Payment Items that are supported by agreement(s) in the form of a
Payor’s PAD Agreement and/or a Payee Letter of Undertaking, as applicable.
This Rule and the Appendices to this Rule are subject to any and all applicable laws
including, without limitation, any and all applicable laws relating to consumer protection.
PADs may be for fixed or variable amounts, and may occur once (One-Time) or berecurring (at Set Intervals or on a Sporadic basis).
General – References
3. This Rule shall be read in conjunction with the following Rules, Standards and guidelines:
a. Introduction to the Rules Manual;b. Rule A1;
c. Rule A4, except as otherwise provided in this Rule or in Rule A4;
d. Section “F” of the Rules Manual;e. Standard 005;
f.

Standard 006;

g. Standard 007;
h. The ISO AFT Usage Guidelines; andi.

6any guidelines relating to PADs published by the Canadian Payments
Association on its website from time to time.

RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

General – Appendices4. The provisions of each of Appendices I, II, III, IV, V and VI form part of this Rule and areincorporated by reference herein.
General – Definitions
5. In this Rule,a. “Authorization” means the consent or agreement, in accordance withapplicable law, of a Payor whose identity has been verified by Commercially
Reasonable Methods, and “Authorized” has a corresponding meaning;b. “Business” means any commercial entity including, but not limited to, any
corporation, partnership, sole proprietorship, trust, franchise, association,
government entity, venture or enterprise;c. “Business PAD” means a PAD drawn on the account of a Payor for thepayment of goods or services related to a Business or commercial activity of
the Payor, including, but not limited to, payments between franchisees andfranchisors, distributors and suppliers, and dealers and manufacturers thathas been identified as a Business PAD “transaction type” in accordance withsection 20 below;
d. “Cash Management PAD” means a PAD drawn on the account of a Payor forthe purpose of transferring, consolidating or repositioning funds between theiraccount at one Member to their account at another Member, for the sameBusiness or closely-affiliated Businesses (e.g. transfers between a parent
company and its subsidiary);e. “Commercially Reasonable Methods” means procedures for verifying the
Payor’s identity (i.e. that the Payor is the person that they purport to be).
These procedures must be reasonable and appropriate, having regard to themethods for verifying identity in general use for similar types of business andpayment applications, and other commercial circumstances of the Payor andPayee at the time the method is used, including, but not limited to,i. the nature of the particular business;
ii. the amount of the particular transaction;iii. the Payee’s volume of payments;
iv. the sophistication of the parties;
v. the availability of alternatives offered to but rejected by either of theparties;vi. the cost of alternative procedures; and7

RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

vii. whether there is an existing business relationship between theparties.
f.

“Confirmation” means the Written notice from the Payee to the Payor
containing the details agreed to by the Payor in setting up a Payor’s PAD
Agreement with the Payee, which may be in the form of a Written copy of the
Payor’s PAD Agreement or a summary of the key terms of that agreement
substantially in the form of Appendix IV, and is communicated in accordancewith section 16;

g. “Funds Transfer PAD” means, where the Payor and the Payee are the same
individual, a PAD drawn on the account of a Payor for the purpose oftransferring funds from their account at one Member to their account at
another Member, including, but not limited to, registered savings plan, mutual
funds, segregated funds, annuities, deposit accounts, cash accounts, andinvestments accounts;
h. “Member Payee” means a Member who is also a Payee;i.

“One-Time” means occurring once, on a set date;j.

“Payee” means a person whose account at a Member is to be, or has been,credited with the amount of a PAD;

k. “Payee Letter of Undertaking” means in the case of a Business PAD, CashManagement PAD or Personal PAD, a Written agreement between a Payeeand its Sponsoring Member which outlines the Payee’s responsibilities andagreement to comply with this Rule and contains the mandatory information
set out at Appendix I;l.

“Payor” means a person whose account at a Member is to be, or has been,
debited with the amount of a PAD;

m. “Payor’s PAD Agreement” means a continuing but revocable Written orotherwise Recorded authority that has been signed or otherwise Authorized
containing the mandatory provisions set out in Appendix II, given by a Payor toa Payee that provides an Authorization for the Payee to issue PADs against
the Payor’s account at its Processing Member;n. “Personal PAD” means a PAD drawn on the account of a Payor for payments
such as, but not limited to, charitable donations, non-Member investment
contributions, mortgage installments, utility bills, insurance premiums,
membership fees, property taxes, credit card billings, lines of credit, loans andpayment for other consumer goods or services but not a Business PAD, a
Cash Management PAD or a Funds Transfer PAD;
o. “Pre-Authorized Debit” or “PAD” means a pre-authorized debit Payment Itemissued by a Payee or Member Payee that is drawn on an account of a Payor
held by a Processing Member;

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RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

p. “Pre-notification” means the required Written notice by the Payee or Member
Payee to the Payor of the amount or change in amount, or change in date(s) toa PAD, prior to the date of the actual PAD, in accordance with sections 17 - 19;
q. “Processing Member” means a Member that holds the account of a Payor;r.

“Recorded” means any form of representation of information or of concepts inany medium that is accessible so that it may be used for subsequent
reference and can be read or otherwise perceived by a person;

s. “Reimbursement Claim” means either (i) a duly completed and signed Written
statement of a Payor in the form set out in Appendix III or (ii) a Written orotherwise Recorded communication from a Payor to its Processing Member
by way of the Internet, e-mail, telephone or other electronic means that has
been authenticated pursuant to the Processing Member’s customary security
measures relating to such means;t.

“Set Interval” means occurring at specified, set or predictable periods or times
or upon the occurrence of such criteria and/or event(s) as may be set out in a
Payor’s PAD Agreement;u. “Sponsoring Member” means a Member that holds the account of the Payee
to be credited with a PAD;
v. “Sporadic” means occurring occasionally, irregularly, intermittently,
infrequently, periodically, and not at Set Intervals or One-Time; andw. “Written” means any form of representing or reproducing words in visible form,
and includes an electronic document, provided the electronic document isunder the control of the intended recipient, the information contained in theelectronic document is substantially in the same form as a paper copy, andthe information contained in the document is accessible if requested.
General - Responsibility and Liability
6. Each Member shall be responsible and liable for every PAD and every Payment Item
purporting to be a PAD that it Exchanges for the purpose of Clearing and Settlement, andshall indemnify the Association and its Members for any direct loss, costs or damages
incurred by them as a result of a PAD or a Payment Item purporting to be a PAD that it has
Exchanged for the purpose of Clearing and Settlement, except where such loss, costs or
damages resulted from erroneous information provided or an error committed by aProcessing Member.
Acting on Notices of Change and Identification Modification Advice
7. A Member Payee shall accept and act on all Notices of Change (NOC) or Identification
Modification Advice (IMA) received in accordance with Rules F1 and F4, respectively.

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RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

PART II – PAYEE LETTER OF UNDERTAKING
Payee Letter of Undertaking – Personal PADs and Business PADs
8. Where a Member agrees to act as a Sponsoring Member for a Payee that issues Personal
PADs or Business PADs, the Member shall:a. obtain a Payee Letter of Undertaking from each Payee for whom it Exchanges
Personal PADs or Business PADs for the purpose of Clearing and Settlementthat includes the mandatory provisions set out in Appendix I;
b. indemnify the Association and its Members for any direct loss, costs or
damages incurred as a result of the fact that a Payee Letter of Undertaking
deviated from the mandatory provisions set out in Appendix I or the intent oreffect of this Rule; andc. require that each Payee must (i) accept and act on any notice of change of a
Payor’s payment routing information that a Payee receives from its
Sponsoring Member that was provided to the Sponsoring Member by the
Payor’s Processing Member in relation to an administrative change to that
information by the Processing Member pursuant to Rules F1 or F4, asapplicable, that does not involve the Payor changing their account to another
Processing Member and (ii) deem such notice of change to be the Payor’s
Authorization to change its relevant payment routing information, provided
that the Sponsoring Member shall be responsible to the Payee for theaccuracy of any such notice of change that it provides to the Payee.
Payee Letter of Undertaking – Cash Management PADs
9. Where a Member agrees to act as a Sponsoring Member for a Payee that issues CashManagement PADs, the Member shall:a. obtain a Payee Letter of Undertaking from the Payee that includes the
mandatory provisions set out in Appendix I; andb. indemnify the Association and its Members for any direct loss, costs or
damages incurred as a result of the fact that a Payee Letter of Undertaking
deviated from the mandatory provisions set out in Appendix I or the intent oreffect of this Rule.
Payee Letter of Undertaking – Exception
10. Where a Member decides to act as a Member Payee to issue Personal PADs or Business
PADs or decides to act as a Sponsoring Member for a Payee to issue Funds Transfer
PADs, a Payee Letter of Undertaking is not required but such Member shall obtain a
Payor’s PAD Agreement from the applicable Payor in accordance with sections 11 and 12.

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PART III – PAYOR’S PAD AGREEMENT
Payor’s PAD Agreement - Personal PADs and Business PADs
11. A Member acting as a Sponsoring Member for a Payee that issues Personal PADs or
Business PADs shall:a. upon the Payee first entering into a Payee Letter of Undertaking and,
subsequently, upon any material amendments to Rule H1, provide orotherwise make available to the Payee full information on Rule H1 or thoseamendments, as may be applicable, including, in each case, the Payee’s
responsibilities and obligations under Rule H1;b. review the Payee’s standard form(s) or process (e.g. telephone script) of
Payor’s PAD Agreement prior to commencement of their use by the Payee,
and any amendments thereto, to ensure that the form(s) or process include(s)the mandatory provisions set out in Appendix II;c. obtain the Payee’s confirmation, in the Payee Letter of Undertaking orotherwise, that the Payee has in place Commercially Reasonable Methods foruse when entering into a Payor’s PAD Agreement with a Payor, in accordancewith this Rule; andd. indemnify the Association and its Members for any direct loss, costs or
damages, incurred as a result of:i. a Payee’s failure to use Commercially Reasonable Methods whenentering into a Payor’s PAD Agreement;
ii. a Payor’s PAD Agreement deviating from the mandatory provisions
set out in Appendix II or the intent or effect of this Rule; and,iii. a Payee’s non-compliance with the provisions of this Rule.
Payor’s PAD Agreement – Members
12. Where a Member decides to act as a Member Payee to issue Personal PADs or Business
PADs or to issue Funds Transfer PADs on behalf of a Payee, the Member shall:a. obtain a Payor’s PAD Agreement that contains the mandatory elements set
out in Appendix II prior to the processing of any PADs;
b. assume responsibility to ensure that each Payor’s PAD Agreement is duly
Authorized by a (the) valid signing authority(ies) for the account; andc. indemnify the Association and its Members for any direct loss, costs or
damages incurred as a result of the fact that the Payor’s PAD Agreement
deviated from the mandatory provisions set out in Appendix II or the intent oreffect of this Rule.

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RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

Payor’s PAD Agreement – Request
13. If a Processing Member makes a request on reasonable grounds for a copy of a Payor’s
PAD Agreement or evidence that a Payor provided Authorization for a PAD, as the casemay be, such as, but not limited to, when a Payor or a customer seeks reimbursement of a
PAD, the Sponsoring Member or Member Payee shall make every reasonable effort toobtain a copy of the Payor’s PAD Agreement or evidence that the Payor provided
Authorization for a PAD and provide it to the Processing Member within a reasonable timeafter receipt of the request. If a Sponsoring Member or Member Payee makes every
reasonable effort to obtain a copy of any such Payor’s PAD Agreement or other evidence
but is unable to provide such a copy to a Processing Member within a reasonable timeafter receipt of the request, and the required record retention period set out in subsection
20(a) has expired, then such inability to provide a copy shall not, by itself, constitute an actof non-compliance with these Rules.
Payor’s PAD Agreement – Exemption
14. Despite any other provisions in this revised Rule, updates are not required to be made to
Payor’s PAD Agreements Authorized and in effect prior to December 31, 2023 to align with
Appendix II. However, on or after December 31, 2023, where there is a conflict between
the provisions of an existing Payor’s PAD Agreement and this revised Rule, therequirements in this revised Rule shall apply.

PART IV – PAD AUTHORIZATIONPAD Authorization – Payor’s Approval Requirements Personal PAD, Business PAD andFunds Transfer PADs, General, Timing, Sporadic Frequency, One-Time, Amount, Top-ups or
Adjustments, Cash Management PADs
15.

a. The following Payor approval requirements apply to Personal PADs, Business
PADs and Funds Transfer PADs:
i. each PAD shall be supported by a Payor’s PAD Agreement that
contains the mandatory provisions set out in Appendix II;
ii. the Payor’s PAD Agreement shall set out the timing for the PAD(s),which may occur at Set Intervals, One-Time, or may be Sporadic;iii. where the Payor’s PAD Agreement provides for PADs that are Sporadic,
the Payee shall obtain an Authorization from the Payor for each andevery PAD prior to each PAD being Exchanged and Cleared. Such
Authorization may not be waived by the Payor;
iv. where the Payor’s PAD Agreement provides for a PAD that is One-Time,the Payee shall obtain a new Payor’s PAD Agreement for any
subsequent PAD;

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RULE H1 - PRE-AUTHORIZED DEBITS (PADS)v. the Payor’s PAD Agreement shall set out whether the PADs are for a
fixed or variable amount, or both, and any conditions that may apply tothe amount;
vi. where the Payor’s PAD Agreement provides for fixed or variable
amount PADs recurring at Set Intervals, no Authorization shall be
required for any change to the amount of the PAD whether that change
in amount is due to a change in any applicable tax rate, top-up or otheradjustment, provided that Pre-notification of that change in amount isgiven in accordance with sections 17,18, or 19 as may be applicable;
andb. the following approval requirements apply to Cash Management PADs:
i. each Cash Management PAD shall be supported by a Payee Letter ofUndertaking that contains the mandatory provisions set out in Appendix I;
ii. where the Payee Letter of Undertaking provides for PADs that are Sporadic,
the Payee shall obtain an Authorization from the Payor for each and every
PAD prior to each PAD being Exchanged and Cleared; andiii. where the Payee Letter of Undertaking provides for a PAD that is One-Time,the Payee shall obtain a new Payor’s PAD Agreement for any subsequentPADs.
PAD Authorization – Confirmation Requirements, Waiver or Reduction of Confirmation
Period: Personal PADs and Business PADs
16. In addition to the requirements set out in section 15, the following Confirmation
requirements apply to all Personal PADs and Business PADs:
a. Subject to subsection (b), the Payee shall, at least 10 calendar days before the due
date of the first PAD, provide or make available to the Payor, a Confirmation (which
may be in the form of a Written copy of the Payor’s PAD Agreement or a summaryof the key terms of that agreement substantially in the form of Appendix IV);b. Where Authorized by the Payor, the requirement to provide or make available a
Confirmation under subsection (a) may be waived or the 10-calendar day period
reduced; andc. Where the Payor has waived the requirement to receive a Confirmation prior to thedue date of the first PAD in accordance with subsection (b), the Payee shallprovide or make available a Confirmation within 5 calendar days following the dateof the first PAD.

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PAD Authorization – Pre-notification Requirements: Personal PADs and Business PADs
occurring at Set Intervals
17. In addition to the requirements set out in section 15, and subject to sections 18 and 19,
where a Payor’s PAD Agreement provides for Personal PADs or Business PADs recurringat Set Intervals, the Payee or Member Payee shall provide or make available Prenotification specifying the amount and date of the next PAD at least 10 days before
a. each and any change in the amount of a fixed amount PAD pursuant to subsection
15(a)(vi) and of any change to the payment date(s); andb. the due date of every variable amount PAD after the first PAD.
PAD Authorization – Exceptions to Pre-notification Requirements: Personal PADs andBusiness PADs occurring at Set Intervals
18. Notwithstanding section 17, no Pre-notification is required for Personal PADs andBusiness PADs recurring at Set Intervals wherea. the amount of the PAD will decrease as a result of a reduction in municipal,
provincial or federal tax; orb. if specifically provided for in the applicable Payor’s PAD Agreement, the amountof the PAD will change as a result of a direct action on the part of the Payor
requesting the Payee to change the amount of a PAD (such as, but not limited to,a telephone instruction).
Waiver of Pre-Notification of changes for all Business PADs or Personal PADs recurring at
Set Intervals, as set out in the Payor’s PAD Agreements
19. The Payor and Payee or Member Payee, where applicable, may mutually agree tospecifically reduce or waive the Pre-notification requirements of section 17 either in the
Payor’s PAD Agreement or by a separate waiver if proper Authorization for the waiver isprovided. If a reduction or waiver clause is inserted into a Payor’s PAD Agreement, such
reduction or waiver clause shall be displayed prominently (e.g. in bold print, highlighted orunderlined).

PART V – PAD PROCESSINGPAD Processing – Coding, AFT PADs, Paper PADs
20. PADs shall be Exchanged and processed as follows:

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a. In accordance with the “F” Rules and Standard 007, PADs effected through theAutomated Funds Transfer (AFT) system shall be identified in the dedicatedtransaction code element (ISO AFT) or field (Standard 005) as follows:i. Business PADs, transaction type “700” to “749”;
ii. Cash Management PADs, transaction type “420” or “717”;
iii. Funds Transfer PADs where no recourse provided other thanpursuant to section 23, transaction type “650”; andiv. all other PADs including, without limitation, any commingled PADs
(i.e. a PAD of which any portion includes a Personal PAD or Funds
Transfer PAD as well as a Business PAD or Cash Management
PAD), transaction types “260” to “272”, “323” or “330” to “599”inclusive.
b. In accordance with the “A” Rules and Standard 006, PADs issued on paper
shall be identified with the words “PAD” on the face of the item and identified
in the “Transaction Code” section of the MICR line as follows:i. Business PADs, code “33”;ii. Cash Management PADs, code “44”;iii. Funds Transfer PADs where no recourse provided other thanpursuant to section 23, code “83”; andiv. all other paper PADs do not require a code.
Note: As of September 2, 2008, to be eligible for clearing, paper PADs must be
created and entered into the clearing system directly by a CPA member, either on its
own behalf or on behalf of a Payee.
PAD Processing – Audit Trail
21. The following audit and record retention requirements apply to all PADs:
a. the Payee shall ensure that an audit trail, including the Payor’s PAD Agreement
and evidence of Authorization, where applicable, and all information needed toretrieve or trace a PAD is maintained for a minimum of 12 months following
the last PAD processed in accordance with that Payor’s PAD Agreement; andb. the above noted audit and record retention requirements are for the purposeof this Rule and do not preclude Members, Member Payees or Payees fromcomplying with any other statutory or legal requirements they may be subject
to for audit or record retention purposes.

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PART VI – DISHONOURED PADS
Dishonoured PADs - Time Limitation, Rule A4, Designation of Branch, Incorrect AccountInformation, Representment, Branch of Return Other than Branch of Deposit
22. The following procedures apply to dishonoured PADs:a. subject to the recourse provisions under section 23, where a PAD is
dishonoured for any reason such as, but not limited to, “NSF”, “stop payment”
or “account closed”, it shall be returned in accordance with the time limitation
set out in Rule A4 and the procedures set out in Rule F1 or F4, as applicable;
b. subject to subsection (d), a dishonoured PAD shall be returned to the Branchof the Sponsoring Member or Member Payee, as the case may be, thatoriginally Exchanged the PAD for the purpose of Clearing and Settlement;
however, subject to Rule F1 or F4, as applicable, where the accountinformation of the Payee is incorrect, the PAD shall be returned to the Branchwhich originated the PAD within the time specified in Rule A4;
c. a PAD that has been dishonoured may only be re-presented in accordancewith the applicable provisions of Rule F1 or F4. In addition, a PAD shall only be
re-presented for the same amount as the original PAD (i.e. shall not include
additional charges); andd. notwithstanding the foregoing provisions of this section 22, where theSponsoring Member or Member Payee, as the case may be, has an agreementwith another Member by which that other Member has been designated toreceive dishonoured paper PADs, the Sponsoring Member or Member Payee,
as the case may be, may designate that any dishonoured paper PAD is to be
returned to a Branch other than the Branch of deposit, specifically, to adifferent Branch of the Sponsoring Member or Member Payee, as the casemay be, or to a Branch of that other Member.

PART VII – REIMBURSEMENT AND RECOURSE
Reimbursement and Recourse – Personal PADs, Business PADs and Funds Transfer PADs,
Time Limit, Declared Conditions, Reimbursement Claim, Interest Claims, Recourse, Claim
after Time Limit
23. Subject to a Member opting out of recourse as set out in section 24, the following
procedures apply where a Payor makes a claim for reimbursement in connection with a
Personal PAD, Business PAD or Funds Transfer PAD other than a Funds Transfer PAD
coded “650” or “83”:a. where a Payor makes a claim under one of the declared conditions set out insection 23(b),16

RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

i. for a Personal PAD or Funds Transfer PAD regardless of whether
that Personal PAD or Funds Transfer PAD has been incorrectly
coded as a Business PAD pursuant to this Rule, up to and including
90 calendar days after the date on which the disputed Personal PAD
or Funds Transfer PAD was debited from the Payor’s account; orii. for a Business PAD, up to and including 10 Business Days after thedate on which the disputed Business PAD was debited from the
Payor’s account,
the Processing Member shall on a best efforts basis, immediately reimburse
the Payor for the amount of the claim;b. the Processing Member shall accept a claim for reimbursement from a Payor
whose account has been debited with a PAD under the following declaredconditions:i. the PAD was not drawn in accordance with the Payor’s PAD
Agreement; orii. the Payor’s PAD Agreement was revoked; oriii. a Confirmation, Pre-notification or notice was not given inaccordance with sections 16, 17, 28 or 29 as may be applicable;c. the Processing Member shall:i. obtain from the Payor making the claim a duly completed and, as
may be applicable, either signed or otherwise Authorized Written orotherwise Recorded Reimbursement Claim; andii. retain the duly completed Reimbursement Claim in accordance with
F1 or F4 as applicable;
d. any interest claim associated with a PAD being returned under this section 23
shall be resolved outside the Rules;
e. a Sponsoring Member or Member Payee, as the case may be, shall honour
and provide recourse for the amount of any PAD returned by a Processing
Member in accordance with this section and reimbursed by the Processing
Member to a Payor;f.

every PAD being returned under this section shall be returned in accordancewith Rule F1 or F4 as applicable; andg. if a Payor makes a claim under this section 23 more than 90 calendar days fora Personal PAD or 10 Business Days for a Business PAD following the date on
which a PAD was processed to the Payor’s account, the claim shall be
addressed by the Payor and the Payee outside of the Rules and such PAD
shall not be returned pursuant to the Rules.

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RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

Reimbursement and Recourse – Recourse Exception: Funds Transfer PADs, No
Reimbursement
24.

a. Except pursuant to section 26, a Member that issues Funds Transfer PADs on
behalf of a Payee is not required to offer recourse as set out in section 23(e) to a
Processing Member for those PADs. Where a Member elects not to offer recourse
for Funds Transfer PADs, the Member shall code those PADs “650” or “83” and any
dispute concerning a Funds Transfer PAD coded “650” or “83” other than a disputereferenced in section 26 shall be addressed by the parties outside the Rules andsuch PAD shall not be returned pursuant to the Rules; andb. where a Payor does not receive reimbursement from a Processing Member for a
disputed Funds Transfer PAD other than a dispute referenced in section 26, theProcessing Member shall provide or otherwise make available to the Payor a duly
completed statement containing the mandatory provisions set out in Appendix Vthat can be presented to the Sponsoring Member who issued the PAD.

Reimbursement and Recourse – Recourse Exception: Cash Management PADs
25. Any dispute by a Payor concerning a Cash Management PAD (i.e. code “420”, “717” or “44”)other than pursuant to section 26 shall be addressed by the Payor or customer and Payee
outside the Rules and such PAD shall not be returned pursuant to the Rules.
Reimbursement and Recourse – Absence of Contract, Reimbursement, Time Limit, Claim
After Time Limit, Interest Claims, Application of Sections
26. Notwithstanding sections 22, 23, 24 or 25 the following procedures apply where a claim is
made by a Payor or other customer of a Processing Member on the basis that no Payor’s
PAD Agreement, Payee Letter of Undertaking or other agreement for a Cash Management
PAD existed between the Payor or customer and the person purporting to be the Payee inrespect of a PAD or other debit erroneously processed to that Payor’s or customer’s
account:
a. subject to subsection (b), the Processing Member holding the account of the
Payor or customer making a claim shall expeditiously reimburse that Payor or
customer for the amount of the claim and return the relevant PAD or debit;
b. any claim made under subsection (a) shall be made no later than 90 calendar
days after the posting date of the improperly processed PAD or debit asshown on the account statement provided to the Payor or customer making
the claim by the Processing Member holding its account;c. after the time limitation provided under subsection (b) has expired, any claim
disputing the existence of a contract (e.g. no Payor’s PAD Agreement or Payee
Letter of Undertaking) shall be addressed by the parties outside the Rules;

18

RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

d. any claim for interest shall be settled in accordance with Rule J10 and limited
to interest lost by and reimbursed to the Payor or customer by the Processing
Member for a returned PAD on the basis of this section, and any claim forinterest shall be processed separately from the returned PAD but include fullparticulars of the PAD; ande. subsections 23(c) and (e) apply, with such modifications as thecircumstances require (such as substituting “customer” for “Payor” whereappropriate), to this section as if the claim was being made under a declaredcondition set out in subsection 23(b).
Reimbursement and Recourse – Payee or Member Payee Dispute
27. Where a Payee or Member Payee disputes the validity of a Payor’s claim made under
sections 23 or 26 as set out in a duly completed Reimbursement Claim, the dispute shallbe addressed by the Payor or customer and Payee outside of the Rules.

PART VIII – FUNDAMENTAL CHANGES
Fundamental Changes – Assignment of Payor’s PAD Agreements and/or Payee Letters ofUndertaking – Changes to Payee Name
28. No Payee Letter of Undertaking or Payor’s PAD Agreement may be assigned by a Payee
whether directly or indirectly, by operation of law, change of control or otherwise to any
person, except:
a. with respect to the assignment of a Payee Letter of Undertaking, if the Payee’s
Sponsoring Member has provided its prior Written consent to suchassignment; andb. with respect to the assignment of a Payor’s PAD Agreement:
i. if the Payee has prominently displayed (e.g. in bold print, highlighted
or underlined) an assignment clause in the Payor’s PAD Agreement
or in the Confirmation, and the Payee has provided to the Payor
Written notice of the full details of such assignment, including theidentity and contact information of the assignee; orii. the Payee has provided to the Payor, prior Written notice of the fulldetails of such assignment, including the identity and contact
information of the assignee, a minimum of 10 calendar days inadvance of any PAD being issued in the assignee’s name.
Changes to Payee Name
29. With respect to a Payor’s PAD Agreement, the Payee shall provide a minimum of 10
calendar days Written notice to the Payor in advance of the next PAD, where the Payee’s
name has changed.
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RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

Notice of Cancellation / Revocation
30.

a. Subject to subsection (b), where the Payor instructs the Payee to cease issuing
PADs, or otherwise revokes the Payor’s PAD Agreement or an Authorization toissue PADs, the Payee shalli. use best efforts to cancel the PAD in the next business, billing orprocessing cycle;
ii. within not more than 30 calendar days from the notice, cease to issue
any new PADs against that Payor; andiii. subject to subsection (ii), not issue any further PADs against the Payor
without that Payor first providing the Payee with a new Payor’s PAD
Agreement,
provided the Payor has provided their instructions or revocation in Writing, or orallywith proper Authorization.
b. Where the Payor and Payee have entered into an agreement (including a
Payor’s PAD Agreement) that clearly sets out a cancellation period that does
not exceed 30 calendar days, a cancellation or revocation under subsection (a)may become effective at the end of that period.

Termination in accordance with Payor’s PAD Agreement or Authorization and Notice31.

a. A Payee may terminate a Payor’s PAD Agreement in accordance with the terms ofthat agreement. Where a Payor’s PAD Agreement does not address termination by
the Payee, the Payee may terminate the Payor’s PAD Agreement with
Authorization from the Payor or by providing at least 30 calendar days’ Written
notice to the Payor before ceasing to issue PADs.
b. Where a Payee terminates a Payor’s PAD Agreement pursuant to Authorizationfrom the Payor under subsection (a), the Payee shall provide or make available a
Written statement specifying the date of the final PAD and the effective
termination date of the Payor’s PAD Agreement within 10 calendar days of the final
PAD.

Cancellation Notice
32. For the purpose of cancelling any PAD or revoking Authorization to issue any PAD in
accordance with section 30, a cancellation notice in the form set out in Appendix VI may
be used.

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RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

PART IX – COMING INTO FORCE
Implementation / Coming into Force
33.

a. This revised Rule H1 was approved by the CPA Board of Directors on June 9, 2022
and comes into effect on October 3, 2022, subject to a transition period whereby
Members have until December 31, 2023 to comply with the revised Rule H1 and toensure that their customer Payees make the necessary changes to comply withthis revised Rule H1.
b. During the transition period, both versions of Rule H1 will be in effect and available
for reference on the Canadian Payments Association’s website. A Member may
comply with the requirements of this revised Rule H1 during the transition period
provided it informs applicable Payors and Payees accordingly in its capacity as
Member Payee and Sponsoring Member, as the case may be.

34. On or after December 31, 2023, where there is a conflict between the provisions of an
existing Payor’s PAD Agreement and this revised Rule, the requirements in this revised
Rule shall apply.

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RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

APPENDIX I - PAYEE LETTER OF UNDERTAKING – MANDATORYELEMENTS
Introduction
This Appendix I sets out the mandatory elements which must be included in every Payee
Letter of Undertaking for the purposes of Rule H1 but does not preclude a Member from
including other provisions, using a different format or incorporating these provisions within
another contract or document provided that the mandatory elements are also included. For
clarity, the mandatory elements set out in this Appendix I are in addition to and do not replace
any provisions of any other agreement between a Payee and its Sponsoring Member, do notlimit a Payee’s obligations under Rule H1 and do not apply to a Member Payee who issues
Personal PADs or Business PADs. Capitalized terms used in this Appendix I have themeanings ascribed to those terms in Rule H1. Suggested language provided in this Appendix I
is for illustration purposes only.
These requirements and each and every Payee Letter of Undertaking is subject to any and allapplicable laws including, without limitation, any and all applicable laws relating to consumer
protection.
Legal, Binding and Enforceable Agreement
1. Assuming that it has been signed by each of its parties, each Payee Letter of Undertaking
shall contain sufficient language to be a legal and binding agreement of the Payee,
enforceable against the Payee by each of its other parties in accordance with its
provisions.
Payor Approval
2. In each Payee Letter of Undertaking, the Payee shall (a) warrant and guarantee to its
Sponsoring Member that each of its Payors has given it a continuing but revocable
authority to initiate PADs which constitutes the sufficient authority for the Processing
Member to debit that Payor’s chosen account for the amount of each PAD that is initiatedby the Payee and (b) undertake to provide evidence of such authority (i.e. the Payor’s PAD
Agreement or business agreement for Cash Management PADs) on request to theSponsoring Member, the Payor or an authorized representative of the Payor (including the
Payor’s Processing Member) within a reasonable time following request. For this purpose,suggested language is as follows:"We warrant and guarantee to you that each Payor (i.e. customer) on whose behalf
any debit purports to have been drawn or direction purports to have been given shallhave signed or otherwise duly Authorized and delivered to us an authority
instructing us to issue debits and, where applicable, shall have given us a direction
pursuant to such an authority to issue a debit as though it were signed or otherwise
duly Authorized by such Payor instructing such direction to be acted upon as though
it were a Written instruction signed by such Payor.

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RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

We undertake to provide evidence of the authority of a Payor for whom we haveissued or caused to be issued any PAD within a reasonable time, upon the requestof the Payor, an authorized representative of the Payor (including the Payor’s
Processing Member) or you."
Valid Signing Authority
3. In each Payee Letter of Undertaking, the Payee shall ensure that each Payor’s PAD
Agreement or Payor’s Authorization for Cash Management PADs is signed or otherwise
duly Authorized by the Payor in a form that constitutes proper authority for the Payor’s
Processing Member to debit the Payor’s designated account as may be set out in the
Payor’s account agreement with its Processing Member.
Payor Acknowledgement Required for Cash Management PADs
4. For Cash Management PADs only:
a. where the Payor and the Payee are the same person, each Payee Letter ofUndertaking shall include the Payor’s continuing but revocable Authorization to
debit its designated account with such Cash Management PADs in a form that
constitutes proper authority for the Payor’s Processing Member to debit the
Payor’s designated account as may be set out in the Payor’s account agreementwith its Processing Member;b. where the Payee and Payor are not one and the same entity, but are closelyaffiliated Businesses, in addition to the other requirements of this Appendix I, thePayor shall sign or otherwise duly Authorize the Payee Letter of Undertaking
related to that Cash Management PAD in a form that constitutes proper authority
for the Payor’s Processing Member to debit the Payor’s designated account as
may be set out in the Payor’s account agreement with its Processing Member
prior to any Cash Management PADs being issued against the Payor’s account;andc. each Payee Letter of Undertaking for a Cash Management PAD shall incorporate
any applicable provision from Appendix II to Rule H1, making such changes as
may be necessary and appropriate in the circumstances.
Sporadic PADs
5. Where a Payee intends to issue Sporadic PADs against a Payor, the Payee shall agree andundertake in its Payee Letter of Undertaking to obtain due Authorization from the Payor inaccordance with Rule H1 for each and every Sporadic PAD that it issues.

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RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

One-Time PADs
6. Where a Payee intends to issue One-Time PADs against a Payor, the Payee shall agree
and undertake in its Payee Letter of Undertaking to obtain a signed or otherwise duly
Authorized Payor’s PAD Agreement for every One-Time PAD that it issues.
General Indemnity
7. In each Payee Letter of Undertaking, the Payee shall indemnify and agree to hold harmless
its Sponsoring Member and each applicable Processing Member from and against any
and all losses, costs, fees, damages, expenses, liabilities, claims, suits and demands
whatsoever that its Sponsoring Member or any such Processing Member may suffer,
incur or be under or that might be made or brought against it in respect of the drawing or
issuing of any PAD, except where such loss, costs, fees, damages, expenses, liabilities,
claims, suits or demands resulted from erroneous information provided or an error
committed by its Sponsoring Member or any Processing Member. For this purpose,suggested language is as follows:"We undertake and agree to indemnify and hold harmless you and any applicable
Processing Member from and against any and all losses, costs, fees, damages,
expenses, liabilities, claims, suits and demands whatsoever that you or any
applicable Processing Member may suffer, incur or be under or that may be made orbrought against you or any such Processing Member by reason of or in any way
arising out of the action in drawing and issuing any debit issued by us, except wheresuch loss, costs fees, damages, expenses, liabilities, claims, suits or demands result
from erroneous information provided or an error committed by you or any
Processing Member."Liability for Accuracy
8. In each Payee Letter of Undertaking, the Payee shall assume liability for the accuracy of all
PADs drawn according to its instructions. For this purpose, suggested language is asfollows:"We shall be solely responsible for the accuracy and completeness of all
information furnished to you and you shall not be responsible in any way forerrors resulting from the inaccuracy or incompleteness of any information
furnished to you by us or any other officer, employee or agent of ours.
We undertake and agree to indemnify you for all amounts that may be erroneously
paid by you and/or any Processing Member in respect of any PAD erroneously
credited or debited by you and/or any Processing Member pursuant to any suchdirection from us whatsoever."24

RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

Force Majeure
9. In each Payee Letter of Undertaking, the Payee shall waive any and all liability of its
Sponsoring Member that is due to delays or non-performance and arises as a result of
circumstances beyond the control of the Sponsoring Member. For this purpose,suggested language is as follows:"You shall not be liable to us and/or to any other person who may claim through us
for any delay, damage, penalty, cost, expense or inconvenience to us or any othersuch person resulting from failure on your part to perform any of the services hereincontemplated by reason of any cause beyond your control."
Change of Sponsoring Member / Termination
10. Each Payee Letter of Undertaking shall provide for the situation where a Payee changes
Sponsoring Member or ceases to use the PAD facility between the time a PAD is issued
and the time of a claim or return of that PAD for non-payment. For this purpose,suggested language is as follows:"We undertake and agree to reimburse you and/or any Processing Member
for payment of any claim made by a Payor in accordance with the CPA Rules
Manual.
This undertaking may be terminated by us or you provided that Written
notice of such termination is given by the terminating party to the otherparty not less than (number) days prior to the day upon which suchtermination is to take effect.
Notwithstanding any such termination, the provisions of Rule H1 and theindemnification provisions of this Payee Letter of Undertaking shall continue toremain in full force and effect with respect to any PAD drawn and issued or any
other obligation of a Sponsoring Member in accordance with the provisions of thisPayee Letter of Undertaking prior to the day upon which such termination takes
effect."Interest Claim
11. In each Payee Letter of Undertaking, the Payee shall accept liability for any interest claim
associated with the return of a PAD for the reason that no Payor’s PAD Agreement existed
between that Payee and the Payor with respect to the returned PAD.
Assignment, Payee Name Changes, Etc.
12. Each Payee Letter of Undertaking shall state that it may not be assigned by the Payee,
whether directly or indirectly, by operation of law, change of control or otherwise, without
the prior Written consent of the Payee’s Sponsoring Member.

25

RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

13. Each Payee Letter of Undertaking shall state that no Payor’s PAD Agreement entered intoby the Payee may be assigned by the Payee whether directly or indirectly, by operation oflaw, change of control or otherwise except:
a. if the Payee has prominently displayed (e.g. in bold print, highlighted or underlined)
an assignment clause in the Payor’s PAD Agreement or the Confirmation and thePayee has provided to the Payor Written notice of the full details of suchassignment, including the identity and contact information of the assignee; orb. the Payee has provided to the Payor prior Written notice of the full details of suchassignment, including the identity and contact information of the assignee, aminimum of ten (10) calendar days in advance of any PAD being issued in theassignee’s name.
14. Each Payee Letter of Undertaking shall state that the Payee will provide a minimum of ten(10) calendar days Written notice to the Payor in advance of the next PAD, where thePayee’s name has changed.
Time Limitation for Reimbursement
15. Each Payee Letter of Undertaking shall set out the applicable time limitation forreimbursement claims. For this purpose, suggested language is as follows:"We agree to reimburse you for any claim paid by you as a result of a
Reimbursement Claim filed by a Payor or other person alleging that a PAD was not
drawn in accordance with its Payor’s PAD Agreement, a Payor’s PAD Agreement
was revoked, any required Pre-notification was not given at least 10 calendar days
before the date a related PAD was processed to the account of a Payor, aConfirmation was not provided in accordance with section 16 of Rule H1 or no
Payor’s PAD Agreement existed between the person making the claim and ourselveswith respect to a particular PAD."
CPA Rules / Confirmation / Pre-notification
16. In each Payee Letter of Undertaking, the Payee shall agree to adhere to the provisions of
the Canadian Payments Act and all related By-laws, Rules and Standards as they apply to
PADs including, without limitation, the Confirmation and Pre-notification requirements or
waiver of Confirmation and Pre-notification requirements, and cancellation requirements
set out in Rule H1. For this purpose, suggested language is as follows:"We agree to be bound by, comply with, respect and apply all relevant provisions of
the Canadian Payments Act and all related by-laws, rules and standards in force
from time to time as they apply to PADs including, without limitation, theConfirmation and Pre-notification requirements or waiver of Confirmation and/orPre-notification requirements, and cancellation requirements as set out in Rule H1."

26

RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

Cancellation
17. Without limiting the generality of section 16 of this Appendix I, in each Payee Letter ofUndertaking the Payee shall agree that,a. subject to subsection (b), where the Payor instructs the Payee to cease issuing
PADs, or otherwise revokes the Payor’s PAD Agreement or an Authorization toissue PADs, the Payee shalli. use best efforts to cancel the PAD in the next business, billing orprocessing cycle;
ii. within not more than 30 calendar days from the notice, cease to issue any
new PADs against that Payor; andiii. not issue any further PADs against the Payor without that Payor firstproviding the Payee with a new Payor’s PAD Agreement,
provided the Payor has made available their instructions or revocation in Writing,or orally with proper Authorization;b. where the Payor and Payee have entered into an agreement (including a Payor’s
PAD Agreement) that clearly sets out a cancelation period that does not exceed
30 calendar days, a cancelation or revocation under subsection (a) may become
effective at the end of that period.
18. Each Payee Letter of Undertaking shall reflect the following:a. A Payee may terminate a Payor’s PAD Agreement in accordance with the terms ofthat agreement or, where the agreement does not address termination by the
Payee, by providing at least 30 calendar days Written notice to the Payor unlessotherwise Authorized by the Payor in Writing or orally; andb. Where a Payee terminates a Payor’s PAD Agreement pursuant to Authorizationfrom the Payor under subsection (a), the Payee shall provide or make available a
Written statement specifying the date of the final PAD and the effective
termination date of the Payor’s PAD Agreement within 10 calendar days of the
final PAD.
Notices of Change
19. In each Payee Letter of Undertaking, the Payee shall undertake and agree to (a) accept
and act on any notice of change of a Payor’s payment routing information that it receives
from its Sponsoring Member that was provided to the Sponsoring Member by the Payor’s
Processing Member in relation to an administrative change to that information by theProcessing Member pursuant to Rule F1 or F4, as applicable, and (b) deem such notice ofchange to be that Payor’s authorization to change its relevant payment routing
information, provided that the Payee’s Sponsoring Member shall be responsible to the
Payee only for the accuracy of information provided in any such notice of change that itprovides to the Payee.

27

RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

Re-presentment
20. Each Payee Letter of Undertaking shall provide that upon the return of a PAD for reason of“Non-Sufficient Funds” or “Funds Not Cleared”, the Payee may re-present the PAD
electronically on a one-time only basis for the same amount as the original debit and suchitem may only be re-presented within 30 days, The Payee Letter of Undertaking shallspecifically state that a re-presentment shall not contain interest, NSF charges or any
other charges in addition to the original PAD amount.
Commercially Reasonable Methods
21. In each Payee Letter of Undertaking, the Payee shall (a) confirm that it has read andunderstands the definition of Commercially Reasonable Methods in Rule H1, and that it
has such methods in place for use when entering into Payor’s PAD Agreements; and (b)agree to use Commercially Reasonable Methods when verifying the Payor’s identity for a
Payor’s PAD Agreement in accordance with the requirements of Rule H1.
Other Obligations
22. In each Payee Letter of Undertaking, the Payee shall (a) undertake to make the terms andconditions of the Payor’s PAD Agreement available to the Payor and (b) where possible,
provide a copy of the Payor’s PAD Agreement signed by the Payor to the Payor. For thispurpose, suggested language is as follows:"We agree that we will, make the terms and conditions of the Payor’s PAD
Agreement available to the Payor. Where possible, we will provide each Payor with acopy of the Authorization signed by that Payor."

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RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

APPENDIX II - PAYOR’S PAD AGREEMENT – MANDATORY AND
OPTIONAL ELEMENTS
Introduction
This Appendix II sets out the mandatory elements which must be included in every Payor’s
PAD Agreement for the purposes of Rule H1 and certain optional elements which may be
included in a Payor’s PAD Agreement for the purposes of Rule H1:
Mandatory Elements:•

Mandatory for all: elements that must be included in every Payor’s PAD Agreement.

•

Mandatory by circumstance: these elements that must be included if the specified
circumstances apply (e.g. Sporadic PADs).

Optional Elements:•

Optional elements that may be included in a Payor’s PAD Agreement at the discretionof the Payor and Payee.

•

For clarity, this list of elements is not exhaustive; the Payor’s PAD Agreement may
include other provisions not included in this list, provided such provisions do notconflict with the requirements in Rule H1.

The Payee is not precluded from including other provisions, using a different format orincorporating the provisions within a contract for goods or services provided or anotherdocument provided that the mandatory elements are also included. For clarity, the mandatory
elements set out in this Appendix II are in addition to and do not replace any provisions of any
other agreement between a Payor and a Payee and do not limit a Payee’s obligations under
Rule H1. Capitalized terms used in this Appendix II have the meanings ascribed to thoseterms in Rule H1.
Each and every Payor’s PAD Agreement is subject to any and all applicable laws including,
without limitation, any and all applicable laws relating to consumer protection.
Mandatory for all Elements:
Mandatory Element
Date and Signature
Authority to Debit
Account

29

Description of Mandatory Element
A date field in which the execution date of the Payor’s PAD Agreement
can be recorded. For Written Payor’s PAD Agreements, a signature field
where the Payor can sign the agreement.
A statement by the Payor that must be duly Authorized in accordancewith its account agreement with its Processing Member, clearly andunambiguously authorizing the Payee to debit an account specified by
the Payor.

RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

Mandatory Element
PAD Category

Amount, Timing orSpecified
Event/Action

Cancellation of
Agreement

Contact Information

Recourse/
Reimbursement
Statement

30

Description of Mandatory Element
A statement that is either pre-printed on the Payor’s PAD Agreement orclearly indicated by the Payor as to whether the PADs are Personal PADs
(e.g. for mortgage payments, utility payments, charity donations, etc.),
Business PADs (e.g. for supplies, lease payments, etc.) or Funds
Transfer PADs (e.g. for registered retirement savings plan payments,
mutual funds payments, etc.).
A statement that is either pre-printed on the Payor’s PAD Agreement orclearly indicated by the Payor as to the amount (i.e. whether fixed orvariable) and timing (i.e. weekly, bi-weekly, semi-monthly, monthly, bimonthly, annual, on set dates or otherwise) of the PAD or whether each
PAD is to be triggered by a specified act, event or other criteria orwhether each PAD is to be Sporadic and, if each PAD is to be triggeredby a specified act, event or other criteria, then an unambiguous
description of that act, event or other criteria.
A Payor’s PAD Agreement shall include cancellation information to theeffect that (a) the Payor may revoke their Authorization at any time,
subject to providing notice (Payee shall set out the notice period whichshall not exceed 30 days), and (b) the Payee may cease issuing PADs
either in accordance with the terms of the Payor’s PAD Agreement or,
where cancellation is not addressed, in accordance with Rule H1. A
Payor’s PAD Agreement shall also advise that the Payor may obtain asample cancellation form, or further information on their right to cancel
a PAD Agreement, at their financial institution or by visiting
www.payments.ca. Note: One-Time Payor’s PADs Agreements only
permit a single PAD.
A Payor’s PAD Agreement shall include reasonable and accurate contact
information of the Payee so that a Payor may contact the Payee by any
method of communication used by the Payee (e.g. postal address, fax
number, telephone number, email address) to make inquiries (e.g.
regarding the Payee’s practices related to personal information, privacy,
and information security), obtain information or seek recourse withrespect to any PAD issued by the Payee.
Except for Fund Transfer PADs coded “650” or “83”, each Payor’s PAD
Agreement must contain the following statement in its entirety:“You [or I/We, depending on the context] have certain recourse rights if
any debit does not comply with this agreement. For example, you [I/we]have the right to receive reimbursement for any debit that is not
authorized or is not consistent with this PAD Agreement. To obtain
more information on your [my/our] recourse rights, [I/we may] contact
your [my/our] financial institution or visit www.payments.ca.”

RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

Mandatory by Circumstance Elements:
Mandatory by
Circumstance
Element
Funds Transfer
PADs Coded “650”or “83”
One-Time PADs

Payment Service
Provider as a Payee
Pre-notification

Description of Mandatory Element
Where a Funds Transfer PAD is coded “650” or “83”, the CPA Member
initiating the Funds Transfer must advise that the Payor will not haverecourse within the CPA Rules.
A Payor’s PAD Agreement that authorizes One-time PADs must specify
that the agreement supports a One-Time PAD, and that the Payor’s
PAD Agreement will no longer be valid once the payment has been
fulfilled. Any subsequent PAD(s) require a newly Authorized Payor’s
PAD Agreement.
Where a Payee is collecting payments on behalf of an entity that isproviding a Payor with goods and services, the Payor’s PAD Agreement
must include a statement that describes the arrangement between the
Payee and the entity providing the Payor with goods and services.
A Payor’s PAD Agreement that provides for Personal PADs or Business
PADs to be issued at Set Intervals may state that the Payor is entitled toreceive Pre-notification in the manner and at the time(s) set out in Rule
H1.

Sporadic PADs

A Payor’s PAD Agreement that authorizes Sporadic PADs must specify
that the Payee is required to obtain due Authorization from the Payor inaccordance with Rule H1 for each Sporadic PAD that the Payee issues
against the Payor.

Waiver/Modificationof Pre-notification/
Confirmation
requirements

A Payor’s PAD Agreement that provides for Personal PADs or Business
PADs to be issued at Set Intervals or One-Time may permit the Payor
and Payee to mutually waive Pre-notification / Confirmation or modify
the Pre-notification / Confirmation requirements of Rule H1 provided the
Payor specifically indicates its acceptance of the waiver or modificationin the Payor’s PAD Agreement or otherwise by way of a separate
Authorization. Any such clause to reduce or waive the standard Prenotification / Confirmation requirements must be prominently displayed(e.g. bold, highlighted or underlined).

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RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

Optional Elements (Note that the Payor and Payee may include additional provisions notlisted here at their discretion):
Optional Element
Change of AccountInformation
Impact ofTermination ofContract for Goods
and Services on
Payor’s PAD
Agreement
Impact ofTermination of
Payor’s PAD
Agreement on
Contract for Goods
and Services
Jurisdiction of
Payor’s PAD
Agreement
Payor’s Rights of
Dispute: PersonalPADs, Business
PADs and Funds
Transfer PADs
Validation by
Processing
Member32

Description of Optional Element
A Payor’s PAD Agreement may require that the Payor must give Written
notice to the Payee of any change with respect to the account against
which it has designated PADs to be drawn.
A Payor’s PAD Agreement may outline the impact of the termination of
the underlying contract for goods and services on the Payor’s PAD
Agreement, if any (e.g., triggering termination of the Payor’s PAD
Agreement, provided this is in accordance with Rule H1).
A Payor’s PAD Agreement may state that it only applies to the methodof payment between the Payor and the Payee and that the agreement
and any termination of the agreement does not have any effectwhatsoever with respect to any contract for goods or services between
the Payor and Payee.
A Payor’s PAD Agreement may include Governing Law and Choice ofForum Clause.
A Payor’s PAD Agreement that provides for Personal PADs, Business
PADs or Funds Transfer PADs for which Rule H1 provides the Payor withthe right to make a claim for reimbursement under one of the declaredconditions set out in subsection 20(b) of Rule H1 subject to completinga Reimbursement Claim, may include language relating to how a claim
for reimbursement may be made.
A Payor’s PAD Agreement may state that the Processing Member is not
responsible for validating the terms of the Payor’s PAD Agreement inrespect of a PAD issued under that agreement

RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

APPENDIX II (CONT’D)SAMPLE A – Pre-Authorized Debit (PAD) Agreement

33

RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

APPENDIX II (CONT’D)SAMPLE B – Pre-Authorized Debit (PAD) Agreement

34

RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

APPENDIX II (CONT’D)SAMPLE C – Sample Payor’s Pre-Authorized Debit (PAD) Agreement for One-Time Debits

35

RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

APPENDIX II (CONT’D)SAMPLE D – Sample Payor’s Pre-Authorized Debit (PAD) Agreement for Payment Service
Providers36

RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

APPENDIX III - SAMPLE REIMBURSEMENT CLAIM FOR PADS
Introduction
This Appendix III sets out the mandatory elements of a Reimbursement Claim for the
purposes of Rule H1. Appendix III does not preclude the elements of the form from being
formatted to permit a Reimbursement Claim to be Authorized by Internet, e-mail, telephone orother electronic means and/or a Payor from deleting one or more of the paragraphs which are
not relevant to a particular claim for reimbursement. For clarity, the elements set out in thisAppendix III are in addition to and do not replace any provisions of any other agreement
between the Payor and its Processing Member and do not limit a Payor’s obligations under
any agreement with a Payee that comply with the applicable provisions of Rule H1.
Capitalized terms used in this Appendix III have the meanings ascribed to those terms in Rule
H1.
Note: A claim for reimbursement by a customer for a disputed PAD must be made within the following timeframes:

REASON
1 - PAD not drawn inaccordance with theterms of an otherwise
duly Authorized Payor’s
PAD Agreement
2 - Otherwise duly
Authorized Payor’s PAD
Agreement revoked prior
to due date3 - Prenotification/Confirmation
not received by Payor
4 - Absence of Payor’s
PAD Agreement

PAD TYPEAPPLICABLE

TIMEFRAME FOR RETURN

Personal PAD
Business PAD
Funds Transfer PAD1

Personal PAD2 and Funds Transfer PADs coded otherthan “650” or “83” – 90 calendar days after the date on
which the PAD was processed to the Payor’s account.
Business PAD – 10 business days after the date on
which the PAD was processed to the Payor’s account.

Personal PAD
Business PAD
Funds Transfer PAD1

Personal PAD2 and Funds Transfer PADs coded otherthan “650” or “83” - 90 calendar days after the date on
which the PAD was processed to the Payor’s account.
Business PAD – 10 business days after the date on
which the PAD was processed to the Payor’s account.

Personal PAD
Business PAD
Funds Transfer PAD1

Personal PAD2 and Funds Transfer PADs coded otherthan “650” or “83” - 90 calendar days after the date on
which the PAD was processed to the Payor’s account.
Business PAD – 10 business days after the date on
which the PAD was processed to the Payor’s account.

Personal PAD
Business PAD
Funds Transfer PAD
Cash Management PAD

90 calendar days after the date on which the PAD wasprocessed to the Payor’s or customer’s account.

Notes:

37

1.

Funds Transfer PADs bearing transaction type “650” or “83” may only be returned through theclearing for reason 4 (Absence of Payor’s PAD Agreement). Refer to Section 26 of Rule H1 for more
information.

2.

“Personal PADs” include any Personal PAD that has been commingled with a Business PAD, Funds
Transfer PAD and/or Cash Management PAD, and any Personal PAD that has been miscoded as a
Business PAD.

RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

Sample Reimbursement ClaimREIMBURSEMENT CLAIM
I/We, (Payor name) declare, with reference to a pre-authorized debit (PAD) of $(amount) drawn infavour of (Payee name) (the PAYEE) on my/our account number (account number) on (date) that was madefor __________ (personal/business reasons) (the PAD) that:
1.
2.

The PAD was not processed in accordance with my/our Payor’s PAD Agreement; OR
My/our Payor’s PAD Agreement
cancellation/revocation was provided

wascancelled/revoked and notice of suchdays prior to the due date of the PAD;

OR:
3.

Pre-notification/Confirmation: (Pre-notification is the required Written notice by the Payee orMember Payee to the Payor of the amount, or change in amount, or change in date(s) to a PAD andthe date(s) of such debiting, prior to the date of the actual PAD. Confirmation is the Written noticefrom the Payee to the Payor in which the details agreed to by the Payor in setting up a PAD
Agreement with the Payee are confirmed):(a)Pre-notification of the PAD was not received in accordance with my/our Payor’s PAD
Agreement and I/we had not waived the requirement for such Pre-notification;
OR

(b)
4.

Confirmation of the Payor’s PAD Agreement was not received in accordance with
Rule H1.

I/We have no Payor’s PAD Agreement or other agreement for PADs with the PAYEE and neverauthorized the PAYEE to draw the PAD.
I/We have not received any reimbursement from the Payee for the PAD.

I/We permit (Payor’s Processing Member name) to provide this form of Reimbursement Claim to the
PAYEE and to the financial institution acting on behalf of the PAYEE for their records.
Signed: _________________________
Payor/Valid Signing Authority(ies)_________________________

Where the Payor’s account agreement with its Processing Member requires the signature of two or more signing authorities, Authorizations
by all such persons are required for the purposes of this Reimbursement Claim.

__________________________________________________

Date

Processing Member Representative38

RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

APPENDIX IV - MANDATORY ELEMENTS OF A CONFIRMATION Introduction
This Appendix IV sets out the mandatory elements of a Confirmation of a Payor’s PAD
Agreement for the purposes of Canadian Payments Association Rule H1 – Pre-Authorized
Debits (PADs), but does not preclude a Payee from including additional provisions or using a
different format provided that the mandatory elements below are included. Capitalized terms
used in this Appendix IV have the meanings ascribed to those terms in Rule H1.
Sample Form of Confirmation:[TO BE PLACED ON PAYEE LETTERHEAD]
To:_____[Payor name]__________[Payor address]_____

Date:____________

Re: Confirmation of Pre-Authorized Debit (PAD) Sign-up
Thank you for signing up for Pre-Authorized Debits from [Payee name]. We have accepted
your PAD Agreement and are writing to confirm the following details:
1.

Account Name:________________________

2.

Financial Institution (Name & Transit #):________________________

3.

Account Number:________________________

4.

Amount of Payment:________________________

5.

Frequency of Payment:

6.

Payment Start Date:

7.

Type of Pre-Authorized Debit: BUSINESS _____

8.

Statement with regard to Pre-notification (for Set Interval PADs only)

9.

Statement with regard to cancellation

10.

Statement with regard to recourse

39________________________________________________PERSONAL _____

RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

Examples of statements with regard to Pre-notification (including waivers):
For fixed-amount PADs
In the event that the amount of this PAD changes, we will send you a written notice identifying the
new amount at least 10 days before the first PAD for that amount, with the exception of a reductionin the amount due to a change in tax rate.
For variable PADs:
We will send you a notice identifying the amount of each PAD at least 10 days before each debit.
If Payee has agreed to reduce or waive standard pre-notification period:
You have agreed that we may reduce the standard period of pre-notification for variable
amount PADs. We will send you notice of the amount of each PAD five days before the
PAD is due.
ORYou have waived your right to receive pre-notification of the amount of the PAD andagreed that you do not require advance notice of the amount of PADs before the debit isprocessed.

Example of a statement with regard to cancellation:
Your Payor’s PAD Agreement may be cancelled provided notice is received [Payee to insert
agreed upon period – not to exceed thirty (30) days] before the next scheduled PAD. If any of theabove details are incorrect, please contact us immediately at [insert contact information]. If thedetails are correct, you do not need to do anything further and your Pre-Authorized Debits will beprocessed and start on the Payment Start Date indicated above.
Example of statement with regard to recourse:
You have certain recourse rights if any debit does not comply with these terms. For
example, you have the right to receive a reimbursement for any PAD that is not authorized or is notconsistent with this PAD Agreement. To obtain more information on your recourse rights, contact
your financial institution or visit www.payments.ca.” (Exception: If a Funds Transfer PAD and coded“650” or “83”, CPA Member initiating the Funds Transfer must advise that the Payor will not haverecourse within the CPA Rules).
Thank you,
Payee Name
Payee Contact information

40

RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

APPENDIX V - SAMPLE “NO REIMBURSEMENT” FORM FOR FUNDS
TRANSFER PADS
Introduction
This Appendix V sets out the mandatory form of “No Reimbursement” notice for the purposesof Canadian Payments Association Rule H1 – Pre-Authorized Debits (PADs), but does notpreclude a Processing Member from including additional provisions or using a different
format provided that the mandatory provisions below are included. Capitalized terms used inthis Appendix V have the meanings ascribed to those terms in Rule H1.
Where a disputed Funds Transfer PAD is coded “650” or “83”, indicating that no recourse shallbe provided for that PAD through the clearing system and such PAD is not to be returned tothe applicable Sponsoring Member except where the Payor claims that no Payor’s PAD
Agreement exists, the Payor should be referred to the applicable Sponsoring Member for
reimbursement and the form below shall be completed by the Payor’s Processing Member
and provided to the Payor to indicate the Processing Member has not provided any
reimbursement to the Payor.
Sample “No Reimbursement” Form
We, (Processing Member name), (branch name), (transit number), declare that, with reference
to the funds transfer pre-authorized debit (PAD) drawn in favour of (Payee name), (Sponsoring
Member name), (branch name), (transit number), in the amount of $(amount) drawn on theaccount of (Payor name), account number (account number), on (date), no reimbursement
was provided for such PAD.

Signed:41_________________________________________________

Processing Member Representative

Date

RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

APPENDIX VI - SAMPLE CANCELLATION NOTICE FOR PADS
Introduction
This Appendix VI sets out a sample form of Cancellation Notice for the purposes of Canadian
Payments Association Rule H1 – Pre-Authorized Debits (PADs), but does not preclude a Payor
or Payee from using any communication in Writing or otherwise that clearly instructs a Payee
to cease issuing PADs or otherwise revoking a Payor’s PAD Agreement by the Payee or
Authorization to issue PADs. The provisions set forth below are in addition to and not in
replacement of any or all provisions of any other agreement between a Payee and a Payor
and do not limit a Payor’s obligations under any agreement with a Payee that comply with theprovisions of Rule H1. Capitalized terms used in this Appendix VI have the meanings ascribedto those terms in Rule H1.
Form of Sample Payor Cancellation Notice:
CANCELLATION NOTICE
TO:
DATE:

(Payee name)(date)

I/We, (Payor name), cancel my/our authorization to issue (Personal, Business, Funds
Transfer or Cash Management) pre-authorized debits in the amount of (amount) against my/our
account number (account number) effective on (date). I/We acknowledge that this cancellation
does not terminate any other obligation that I/we may have with the Payee.
Signed:_________________________
Payor/Valid Signing Authority(ies)_________________________

Form of Sample Payee Cancellation Notice:
CANCELLATION NOTICE
TO:
DATE:

(Payor name)(date)We, (Payee name), cancel the issuance of (Personal, Business, Funds Transfer or CashManagement) pre-authorized debits in the amount of (amount) against your account number(account number) effective on (date). The last PAD will be debited from your account on (date).
This cancellation does not terminate any other obligation that you may have with the (Payee
name).
Signed:42_________________________
Valid Signing Authority(ies)_________________________

RULE H1 - PRE-AUTHORIZED DEBITS (PADS)

Note:
Subject to the terms of any agreement between a Payor and Payee including their
Payor’s PAD Agreement, a Cancellation Notice may be provided to a Payee by way ofregistered mail, telephone, Internet, e-mail, fax or prepaid courier and must be provided incompliance with the notice requirements for cancellations, if any, set out in the applicable
Payor’s PAD Agreement.

43