A Canadian EFT Authorization Form — more precisely known as a Pre-Authorized Debit (PAD) Agreement — is a legally binding document under which a payor (account holder) grants a payee (creditor or service provider) permission to withdraw funds directly from the payor's Canadian bank account at scheduled intervals or on specific dates. Unlike a one-time bank transfer, a PAD authorization establishes a standing debit arrangement governed by Payments Canada Rule H1, which is the primary regulatory framework for pre-authorized debits in Canada.

PAD agreements are distinct from the ACH authorization forms used in the United States. In Canada, the clearing and settlement infrastructure is managed by Payments Canada (formerly the Canadian Payments Association), a not-for-profit organization established under the Canadian Payments Act (R.S.C., 1985, c. C-21). Rule H1 sets out the conditions under which PAD items may be processed, the information that must appear in the authorization, the notice requirements for changes to debit amounts, and the rights of payors to seek reimbursement.

Canadian PADs are classified into two categories with different legal implications. A Personal PAD applies when the account being debited is a personal consumer account — typically a chequing or savings account held by an individual for personal, family, or household purposes. A Business PAD applies when the account being debited belongs to a corporation, partnership, or other business entity. This distinction is critical because it determines the reimbursement window: personal PAD payors have ninety (90) calendar days to dispute an unauthorized debit, while business PAD payors have only ten (10) business days.

For a PAD authorization to be valid under Rule H1, it must clearly identify the payor and payee, specify the account to be debited using the standard Canadian banking coordinates (transit number, institution number, and account number), state the amount or method for determining the amount of each debit, indicate the frequency and timing of debits, and describe the underlying purpose or obligation being satisfied. The authorization must also include a statement of the payor's right to cancel and instructions for exercising that right. A copy of the signed PAD agreement must be provided to the payor.

A Canadian PAD authorization form is needed whenever a business or individual wants to collect recurring or scheduled payments directly from a customer's or counterparty's Canadian bank account through the automated clearing system.

Subscription and membership services use PAD agreements to bill customers monthly or annually for software-as-a-service (SaaS) platforms, streaming services, gym memberships, insurance premiums, and professional association dues. The PAD authorization eliminates the need to chase manual payments or process credit card transactions, reducing both administrative costs and payment failure rates.

Mortgage lenders, credit unions, and private lenders use PAD agreements to collect bi-weekly or monthly mortgage instalments, loan repayments, and line-of-credit payments directly from borrowers' accounts. This is one of the most common uses of PAD in Canada, as it ensures timely payment and reduces the risk of missed payments.

Landlords and property management companies use PAD agreements to collect rent from tenants on a monthly basis without requiring the tenant to write a series of post-dated cheques. This is particularly common in residential leases governed by provincial residential tenancy acts.

Utility and telecommunications providers use PAD agreements to collect monthly bills for electricity, natural gas, water, internet, and wireless services. Customers who enroll in pre-authorized payment plans often receive discounts or avoid late payment fees.

Payroll service providers and employers who pay contractors or freelancers on a fixed schedule may use PAD arrangements to fund payroll accounts or remit payments on scheduled payroll dates.

Without a properly executed PAD agreement, a payee who initiates a bank debit without authorization risks the debit being returned by the payor's financial institution as unauthorized, potential liability for bank charges and penalties, and loss of access to the clearing system for repeated violations of Payments Canada rules.

Party Identification — The PAD agreement must clearly identify the payee (the company or individual receiving funds) and the payor (the account holder whose account will be debited). Full legal names, addresses, and contact information should be included for both parties.

Banking Coordinates — The Canadian banking system uses a three-part account identification system: the five-digit branch transit number identifying the specific branch, the three-digit financial institution number identifying the bank or credit union, and the account number. These three elements together are required by Payments Canada Rule H1 and must be verified, typically by attaching a void cheque or an official bank-issued direct deposit form.

PAD Type Designation — The agreement must specify whether this is a Personal PAD or a Business PAD. This distinction determines the payor's reimbursement timeline: 90 calendar days for personal accounts and 10 business days for business accounts under Rule H1.

Payment Amount and Frequency — Specify the exact debit amount per transaction (or the formula for calculating variable amounts), the frequency of debits (weekly, bi-weekly, monthly, etc.), the start date of the first debit, and whether the authorization continues indefinitely or expires on a specific end date.

Authorization Scope — Describe the underlying contractual obligation, service agreement, or debt that the PAD payments are satisfying. This creates an evidentiary link between the PAD and the underlying commercial relationship, which is important if the payor later disputes the authorization.

Pre-Notification Requirements — Under Payments Canada Rule H1, the payee must provide advance written notice of the debit amount and date before processing the first PAD item, and before any change in the debit amount. The notice period is typically ten (10) calendar days, though many PAD agreements waive this requirement by pre-disclosing all scheduled debit amounts and dates upfront.

Cancellation Rights and Procedure — The payor's right to cancel must be clearly stated, including the required notice period (typically 30 calendar days), the method of delivering the cancellation notice (written notice to the payee), and the consequence of cancellation (no further debits after the notice period expires).

Reimbursement Rights — State both the personal PAD reimbursement window (90 days) and the business PAD reimbursement window (10 business days). Include instructions for the payor to contact their financial institution to exercise recourse rights under Rule H1.

Privacy Compliance — The payee must confirm that banking information will be used only for the purpose of processing PAD items and will be protected in accordance with PIPEDA or applicable provincial privacy legislation.

Signature Block — A valid PAD authorization must be signed by the payor, and the signed copy must be retained by the payee and a copy provided to the payor. The date of signing and the payor's printed name must appear alongside the signature.