A pre-authorized debit is how a Canadian biller pulls money from your bank account: you sign a PAD agreement (on paper or electronically), and on each due date the biller's bank originates a debit that is exchanged through the ACSS batch system and posted against your account. Payments Canada Rule H1 governs the arrangement and defines four categories: personal, business, cash management, and funds transfer PADs. If a debit is dishonoured (say, for insufficient funds) it returns through the same system, and a personal payor who spots a debit that was never authorized or does not match the agreement can claim reimbursement from their own bank for up to 90 calendar days after the withdrawal; business claims get a shorter window. The mechanics rhyme with a US ACH debit, but the rulebook is different: Rule H1 and Payments Canada standards apply, not Nacha's rules and return codes.
In a flow
The PAD agreement and the debit file are message legs: the biller submits an AFT debit through its bank, and the item is exchanged through ACSS to your bank. The money leg is your account being debited on the due date, with the banks settling their net positions the next business day and the biller funded net. Returns, like an NSF item, are an exception leg back through the same rail.
Common misconceptions
Myth: A PAD is basically card autopay.
Reality: No card is involved. A PAD debits your bank account directly over Canada's batch EFT rail under Payments Canada Rule H1, while card autopay is a card network transaction with chargeback rights. Different rails, different dispute paths: a PAD dispute is a Rule H1 reimbursement claim through your own bank, not a chargeback.
Myth: Cancelling my PAD agreement cancels the bill.
Reality: Cancelling stops the debits (the biller must act on your cancellation notice), but the underlying contract and anything you owe survive, so you still need another way to pay the biller. And if debits keep arriving after a proper cancellation, that becomes a reimbursement claim to your bank.
Related terms
See it in a guide
Sources
- Rule H1, Pre-Authorized Debits (PADs) ↗ · Payments Canada. The rule behind PAD agreements, the four PAD categories, dishonoured items, and reimbursement claims.
- Pre-authorized debit consumer guide ↗ · Payments Canada (operator). PAD agreements, cancellation, and the 90 calendar day reimbursement window in plain language.
- ACH Network rules and roles ↗ · Nacha. The US ACH debit counterpart: the same pull payment shape under a different rulebook and return framework.
Educational, plain-English explainers. Not legal, compliance, tax, or financial advice. These cover fundamentals, not current fees, limits, or rates (which change). Rails and parties vary by program and country, so verify specifics against primary sources. Last reviewed June 2026.