OTTAWA, Sept. 16 /CNW Telbec/ - The Canadian Payments Association (CPA)
has published new requirements for pre-authorized debits (PADs) to ensure
appropriate information is disclosed to consumers and other parties using this
option to pay for goods or services. As a result, all businesses using PADs to
collect payments from their customers will need to make some changes to the
forms or processes through which they obtain customers' authorization.
A PAD is a payment based on an agreement between a business and its
customer through which the business obtains the customer's authorization to
debit his or her bank account in accordance with specified terms. Requirements
for these items to be processed through the clearing system are set out in the
CPA's Rule H1 - Pre-authorized Debits. Recurring charges to credit cards are
outside the scope of this framework.
On average, more than 2.3 million PADs were processed through the
Canadian clearing system each business day during 2007.
Mandatory Information Elements for Pre-authorized Debit Agreements
A key change in the new version of Rule H1 is the definition of mandatory
elements to be included in the Payor's PAD Agreement - that is, the form or
process through which the business or "payee" obtains the customer's
authorization to debit his or her bank account. Among the mandatory elements
- information on how to cancel a PAD,
- the payee's contact information, and
- a standard statement with regard to the consumer's rights of recourse
in the event of a debit that does not follow the terms of the agreement
or is not authorized.
All payees using PADs must update their forms or electronic processes to
reflect these new requirements by February 28, 2010. Each payee must submit a
copy of its proposed forms and/or electronic processes to its financial
institution to confirm that they meet the new requirements. Payor's PAD
Agreements in effect before that date are grandfathered to avoid potential
disruption to both consumers and payees.
As part of the transition, CPA's member financial institutions will be
updating their contractual arrangements with corporate clients on whose behalf
they enter PADs into the clearing system to incorporate their clients' new
obligations as PAD payees.
More Flexible Framework for Electronic PAD Agreements
The new framework also provides more flexibility to establish Payor's PAD
Agreements through electronic means such as over the telephone or the
internet. Payees who wish to initiate PAD Agreements electronically must
submit their proposed electronic forms or processes to their financial
institution for review, including the proposed process to confirm the identity
of the payor in the electronic environment. In addition, for all electronic
Payor's PAD Agreements, the payee must send a written confirmation of all
details to the payor in advance of the first PAD; the standard period is
15 days before the first PAD, which may be reduced by mutual agreement, but
may not be waived.
More information on the new requirements, including a copy of Rule H1, is
available on the CPA's web site at www.cdnpay.ca.
The Canadian Payments Association (CPA), created by an Act of Parliament
in 1980, operates Canada's national clearing and settlement systems;
facilitates their interaction with other systems involved in the clearing and
settlement of payments; and facilitates the development of new payment methods
and technologies. It promotes the efficiency, safety and soundness of the
clearing and settlement systems, taking into account the interests of users.
Its current membership comprises virtually all of Canada's bank and non-bank
deposit-taking financial institutions. In 2007, the CPA's systems cleared and
settled transactions averaging $203 billion each business day.
For further information:
For further information: Roger Dowdall, Vice-President, Communications
and Education, Canadian Payments Association, (613) 238-4173, ext 3240