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How to ensure compliance with the requirements

The following is a summary of the key elements you must take into consideration to remain compliant with Canadian Payments Association (CPA) requirements regarding pre-authorized debits (PADs).

Written confirmation of an electronic Payor`s PAD Agreement

At least 15 days before the first PAD under an electronic agreement, you must send a written confirmation to the payor.

See Appendix IV of Rule H1 to find out about the mandatory elements the confirmation must include (PDF, 447 KB).

Note: If your company and the payor mutually agree, the standard 15-day period for advance delivery of the written confirmation may be reduced, but it must never be less than 3 days. The written confirmation may not be waived.

Sporadic PADs: Additional authorization

The Payor's PAD Agreement must include provisions for sporadic PADs.

A Payor's PAD Agreement that authorizes sporadic PADs must specify that the issuing company is required to obtain due authorization from the payor in accordance with Rule H1 for each sporadic PAD that the issuing company issues against the payor.

For example, recording a telephone call in which the payor authorizes the PAD with a password or secret code could serve this purpose, provided that the signed agreement is already in place.

Pre-notification requirements

If the PADs are for variable amounts or if you plan to adjust the amount specified in the Payor's PAD Agreement, you must notify the payor, in writing, at least 10 days prior to the date of withdrawal, unless the payor has agreed, either in the Payor's PAD Agreement or through a separate authorization, to reduce or waive this pre-notification, or the payor directly instructs you to change the amount.

Exception: Pre-notification is not required in the event of a change in the PAD amount due to a reduction in a federal, provincial or municipal tax.

Note: If a clause to reduce or waive the standard 10-day pre-notification period is included in the Payor's PAD Agreement, it must be prominent (e.g., highlighted, underlines or in bold) to ensure that the payor is aware of it.

Authorizations

You must retain a copy of each Payor's PAD Agreement, whether authorized by a signature or through an electronic method, while it is in effect and for at least 1 year thereafter. You must be able to provide them upon request.

Any further authorizations, including those for sporadic PADs, must also be retained for the same period.

Cancellation provisions for payors

You must provide payors with information on how to cancel their PAD arrangement in your Payor's PAD Agreement.

You must also act on payors' instructions to cancel their PADs in a timely manner. PADs should be cancelled before the next scheduled withdrawal, provided that the request was received with enough lead time (normally a few days) to allow you to do so. You must ensure all PAD cancellations are put into effect within 30 days of receiving them.

Note: Although the payor may cancel the PAD Agreement at any time, doing so does not affect any ongoing financial obligations that the payor has to your company under a broader contract, such as a lease.

Notice to customers if your company changes name

If you, as the issuing company, change your organization's name, you must provide written notice to each payor a minimum of 10 days before the next PAD.

Transferring PAD Agreements to another company

You may not transfer any of your contractual agreements with payors for PADs to another organization (for example, though the sale of the company or a business unit, or to a collection agency where it is otherwise permitted) unless you have provided to payors full details of the transfer, including the name and contact information of the new company, at least 10 days in advance of the first PAD being issued in the proposed new company's name.

Further, you may not transfer your Direct Withdrawal Service Agreement or equivalent contract with your financial institution to another party without your financial institution's written consent.

Responsibility for payor reimbursement claims

PersonaI PADs

In the event that a payor disputes the validity of a PAD within 90 days and makes a claim that it was not drawn in accordance with his instructions, the payor's financial institution is required, under CPA Rules, to reimburse funds. The PAD will then be returned through the clearings, and Desjardins will charge it back to you.

Business PADs

For Business PADs, this recourse period is 90 calendar days if the Payor claims that there is no agreement and 10 business days for other discrepancies.

Limitations on re-issuing returned PADs

If a PAD is returned due to insufficient funds, you may re-present the PAD only once, and this must be done within 30 days of the original transaction date. If you re-issue the PAD, it must be for exactly the same amount as the original transaction

Notices of change to customers' banking information

If you receive from Desjardins a Notice of Change advising you of a change to a payor's branch transit number or account number that does not involve a customer changing his financial institution, you must update your files to reflect the new information so that the PADs can continue to be routed efficiently to the correct account.

Source: Canadian Payments Association

Find out more
Visit the Canadian Payments Association 's Web site.

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