Amendments to rule H1 facilitate Pre-Authorized Debit (PAD) user experience

Amendments to ACSS Rule H1, Pre-Authorized Debits (PADs) have been approved by the Payments Canada Board, and are in effect as of today.

A PAD agreement is a contract signed between a payor (the end user whose account is being debited) directly with a payee (the end user whose account is to be credited, such as a biller) that authorizes the payee to withdraw funds from the payor’s bank account.

Rule H1 outlines the procedures for the clearing and settlement of PADs. The amendments reflect considerable technological and payment advancements since its last review.

“Our goal to modernize payments in Canada includes not only our systems, but the rules that govern them,” said Shawn Van Raay, Chief Information Officer. “Amending Rule H1 now makes pre-authorized debit agreement obligations easier to understand, and gives a payor more confidence in signing that agreement.”

Notable amendments to Rule H1 include:

The distinction between electronic and paper PAD agreements has been removed. As of today, the PAD onboarding experience is now uniform regardless of type of contract, paper or electronic. This will reduce onboarding time and improve the customer experience, and facilitate contract management for businesses accepting PADs.

The definition of “commercially reasonable” was revised. Rule H1 now allows a payee to use a form of verification that meets the circumstances of the PAD, their relationship with the payor, and meets the payee’s operational capabilities, as long as that verification method can ultimately be determined by a court of law.

The definition of “one-time PADs” was created to provide consistency to payors. With new Rule H1 amendments, one-time PAD agreements now automatically terminate once the payment has been completed, and any subsequent PAD transaction(s) require a new agreement.

The announcement of Payments Canada’s amendments to Rule H1 follows a public consultation earlier this year.

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