Pre-authorized debits (PAD)
Learn more about pre-authorized debits (PADs). A PAD lets a biller withdraw money from your bank account when a payment is due. A biller is the company or organization that charges you for a product or service. PADs may help if you want to make payments from your bank account on a regular basis.
Understanding pre-authorized debits
With a PAD, you allow a biller to take money from your bank account when a payment is due. PADs may work well for regular payments you want to make.
You may use PADs for:
- mortgage payments
- utility payments
- Registered Retirement Savings Plan (RRSP) contributions
- insurance premium payments
- credit card payments
Non-sufficient funds fees
Your financial institution may charge you non-sufficient funds (NSF) fees. This is when there isn’t enough money in your account to cover a transaction, like a PAD. Watch your account balance to avoid extra fees.
Make sure you know how much your financial institution will charge you for non-sufficient funds.
Learn more about non-sufficient funds fees.
Get electronic alerts from your financial institution
Your financial institution may send you an electronic alert when the balance of your chequing account falls below a certain amount.
These alerts may help you manage your finances and avoid fees.
Learn more about electronic alerts.
How to protect yourself when using a preauthorized debit agreement
If you use a PAD agreement:
- read the terms and conditions before signing
- keep a copy of the signed agreement or confirmation for your records
- inform the biller or financial institution you have PADs with if your banking information changes to avoid missed or declined payments
- check your account to confirm withdrawals match what you pre-approved
- let your financial institution know about incorrect debits or debits you didn’t approve, within 90 days of the withdrawal
Differences between preauthorized debits and automatic payments
A PAD lets the biller withdraw money from your account. An automatic payment doesn’t give the biller permission to withdraw money.
With an automatic payment, you send money from your account to the biller. You set it up yourself, not the biller.
Tip
Manage payments when it works for you. You can usually set up and manage automatic payments through your financial institution or online banking, including one-time or recurring payments.
Setting up a preauthorized debit agreement
You set up a PAD by completing a pre-authorized debit agreement that gives permission for withdrawals. You may set it up in writing, electronically or over the telephone.
You need to provide your banking information as part of the agreement.
You may need to provide a void cheque to confirm your account details.
Tip
Protect yourself from fraud. Write VOID in ink across the front of the cheque. Don’t sign the VOID cheque.
What your preauthorized debit agreement needs to include
Your PAD agreement needs to explain the amount the biller will withdraw and how often.
Amount
Your agreement needs to say if the amount stays the same each time or can change:
- fixed, or the same amount each time
- variable, or a different amount
If the amount can change, the biller must give you written notice of the amount. They must do this at least 10 days before the withdrawal unless you waive or shorten the notice period.
Frequency
The agreement needs to say how often the biller may withdraw money from your account:
- fixed, or on a set schedule, for example weekly, monthly, every 6 months or once a year
- variable, or only if you’re billed, for example if you make a purchase
The biller must get your approval for each PAD if:
- your agreement doesn’t define the frequency, or
- the frequency is variable
Confirm how payments are approved. You may need to give the biller a password or secret code to approve the PAD.
Cancelling a preauthorized debit
To cancel a PAD agreement, you must notify the biller in writing. Keep a copy of your notice.
The agreement needs to explain how to cancel the PAD. After you cancel, check your account records to confirm the withdrawals stopped.
If withdrawals continue, contact the biller. If you’re not satisfied with their response, you have 90 days to ask your financial institution for a reimbursement.
Stopping a PAD doesn’t erase what you owe. Cancelling your PAD agreement doesn’t cancel your contract with the biller or the money owed. You’ll need another way to pay any remaining amounts.
How to request a stop payment
If you need to cancel a single payment, you may request a stop payment from your financial institution. You may also be able to put a stop payment on recurring payments.
Handling debits you didn’t approve
If you notice a PAD on your account that you didn’t approve, contact the biller and ask for your money back.
When you may get your money back
You have the right to get your money back if:
- the biller withdrew the money on the wrong date or for the wrong amount, or
- you cancelled the contract
You may not be able to get your money back if the PAD moved money between your accounts at 2 financial institutions.
Contact your financial institution for details on its PAD policy.
When to report an unauthorized preauthorized debit
You usually have 90 calendar days from the date the funds come out of your account to report the problem. Contact your financial institution and ask for your money back. Your financial institution doesn’t need to reimburse you if more than 90 days have passed.
Your financial institution will ask you to sign a declaration that confirms why you’re reversing the debit.
Tip
Act quickly if a debit wasn’t authorized. If an unauthorized PAD caused extra charges, ask your financial institution to reverse them. For example, if it led to another payment being declined.
Making a complaint about an unauthorized debit
You may file a complaint with your financial institution if an unauthorized debit goes through your account.
Learn how to file a complaint with your bank.