What Is a Pre-Authorized Debit (PAD)?
A pre-authorized debit is a scheduled, recurring (or one-time) withdrawal from your bank account initiated by a payee — a company or individual you have authorized to pull funds. Common examples:
| Type | Examples |
|---|---|
| Recurring bill payments | Utilities, rent, mortgage, insurance premiums |
| Loan/credit repayments | Car loan, personal loan, student loan, credit card minimum |
| Subscription services | Streaming, gym memberships, software subscriptions |
| Government payments | CRA installment payments |
| Charitable donations | Monthly donor programs |
| Business PADs | Supplier invoices, payroll funded via PAD |
PADs are governed by Payments Canada Rule H1, which sets out rights for both payers and payees.
PAD Amounts and Limits
There is no legislated maximum amount for individual PAD transactions in Canada. Limits depend on:
- Your PAD agreement — specifies the amount, frequency, and any maximum
- Your account balance — an NSF PAD will be returned; NSF fees apply
- Your bank’s internal fraud controls — unusually large or unexpected PADs may be flagged
Variable vs. fixed PADs
| PAD Type | Amount | Example |
|---|---|---|
| Fixed (sporadic) | Same each time | Monthly mortgage payment |
| Variable (fixed) | Changes each cycle | Monthly utility bill |
| One-time | Single transaction | One-time payment authorization |
For variable-amount PADs, the payee must notify you of the amount 10 calendar days before the debit date, unless you have waived this notice period in the PAD agreement.
Your Rights Under Payments Canada Rule H1
Right to cancel
You can cancel a PAD agreement at any time by providing written notice to the payee at least 30 days before the next scheduled debit. Cancelling the PAD agreement does not cancel the underlying debt — you still owe the money; you’ve just changed how it’s collected.
Right to reimbursement
You are entitled to reimbursement if a PAD was:
- Processed without a valid PAD agreement
- For an amount different from what was agreed (for fixed-amount PADs)
- Processed before the agreed date
- Processed after you gave proper written cancellation notice
Claim deadline:
- Personal PADs: 90 calendar days from the debit date
- Business PADs: 10 business days from the statement date showing the debit
How to file: Contact your bank’s customer service and state you are making a “PAD reimbursement claim.” Your bank must reimburse you within 10 business days of receiving a valid claim, and then recover the funds from the payee.
How to Set Up a PAD Agreement
A valid PAD agreement must include:
- Your name and account information
- The payee’s name
- The amount (or how the amount will be determined)
- The payment frequency and start date
- A statement of your cancellation rights
- Contact information for the payee
PAD agreements can be paper, digital, or verbal (if properly recorded). Online subscription sign-ups with credit card or banking information constitute a PAD agreement.
How to Cancel a PAD
Step 1: Notify the payee in writing
Send written notice to the company (email is generally sufficient, keep a record):
“I hereby cancel my pre-authorized debit agreement effective [date]. My last debit authorized under this agreement is [date, or ’none’ if past]. SIN/Account: [your account number with them].”
Retain a copy and any delivery confirmation.
Step 2: If the payee ignores cancellation
Contact your bank and instruct them to stop the PAD. Under Rule H1, your bank must stop future PADs upon your written or verbal request, citing the cancelled agreement. Bring or email proof of your cancellation notice to the payee.
Step 3: Monitor your account
Check your account for 2–3 cycles after cancellation to confirm no further debits appear.
NSF Fees for Returned PADs
If a PAD processes but your account lacks funds, the PAD is returned “NSF” (non-sufficient funds):
| Bank | NSF Fee (per returned item) |
|---|---|
| RBC | $48 |
| TD | $48 |
| Scotiabank | $48 |
| BMO | $48 |
| CIBC | $48 |
| Tangerine | $25 |
| EQ Bank | $0 (no NSF fee) |
| Simplii Financial | $25 |
The payee may also charge their own NSF fee (commonly $20–$50). An NSF on a loan or mortgage PAD may also trigger a late payment penalty.
To avoid NSF fees, maintain a buffer in your account or set up overdraft protection.
PAD vs. Bill Payment vs. e-Transfer
| Feature | PAD | Online Bill Payment | Interac e-Transfer |
|---|---|---|---|
| Initiated by | Payee | You | You |
| Typical uses | Recurring bills, loans | One-time or recurring bills | Person-to-person, business |
| Governed by | Payments Canada H1 | Varies | Interac e-Transfer rules |
| Right to cancel | Yes (30 days notice) | Cancel via your bank | Cancel before recipient accepts |
| Reimbursement if unauthorized | Yes (90 days for personal) | Limited | Limited |