What Is a PAD Submission? Agreement, Types, and Cancellation

A pre-authorized debit, or PAD, is a written authorization that lets a biller withdraw money directly from your bank account on a recurring schedule, so you don’t have to initiate each payment yourself. In Canada, these arrangements are governed by Payments Canada Rule H1, which sets out what the agreement must contain, how you cancel it, and how long you have to dispute a withdrawal you didn’t approve.¹ In the United States, similar recurring debits fall under Regulation E instead, and the protections work differently.

PADs are the standard way people pay mortgages, utility bills, insurance premiums, gym memberships, charitable donations, and credit card balances without having to remember a due date each month. The convenience comes with a trade-off: you’ve handed another party standing permission to reach into your account, so the rules around that permission matter.

What Has to Be in a PAD Agreement

A valid PAD agreement under Rule H1 must identify the exact account being debited, which means your branch transit number, financial institution number, and account number. You usually pull those from a voided cheque or your online banking portal. The agreement must also state whether each withdrawal will be a fixed amount or a variable amount that changes with usage, and it must spell out the timing of debits, your full legal name, and the terms for cancellation.¹

Before the first withdrawal hits your account, the biller must send you a confirmation of the PAD details at least 10 days in advance, although you and the biller can agree to shorten or waive that lead time.² Use that window to check the amount, frequency, and start date against what you actually agreed to. Keep your own signed copy of the authorization; if a dispute surfaces months later, it’s the single most useful piece of evidence you’ll have.

The Four Types of PADs and Why the Category Matters

Payments Canada recognizes four categories, and the category you fall into determines how long you have to dispute an unauthorized debit.

Personal PAD: Payments for consumer goods and services, including mortgages, utilities, insurance, credit cards, donations, and memberships.¹
Business PAD: Payments tied to commercial activity, such as between franchisees and franchisors or dealers and manufacturers.
Funds Transfer PAD: Movements of your own money between your accounts at different financial institutions.
Cash Management PAD: Transfers a business uses to move or consolidate funds between its own accounts at different institutions.

The difference between a Personal and a Business PAD has real consequences. A Personal PAD gives you 90 calendar days to dispute an unauthorized withdrawal. A Business PAD gives you only 10 business days. If a biller mislabels a Personal PAD as a Business PAD, the 90-day window still applies.¹ Check the category on your agreement before you sign.

How to Cancel a PAD

To cancel, notify the biller in writing and keep a copy of the notice.³ Rule H1 allows the biller to require a notice period, but that period cannot exceed 30 calendar days. Once that window passes, the biller has to stop issuing new debits against your account.¹

One important point: cancelling the PAD does not cancel the underlying contract or erase anything you owe. You’re changing how you pay, not whether you pay. Arrange another payment method for any remaining balance, or you’ll face late fees and possibly collection activity.³

If the biller keeps pulling money after the cancellation period has run, contact your bank and request a stop payment on the recurring debit. Ask the bank how much lead time it needs to process the request.³ After cancellation, watch the account for at least two billing cycles to make sure the withdrawals have actually stopped.

Disputing a Withdrawal You Didn’t Authorize

If a debit doesn’t match the terms of your signed agreement, you can file a dispute through your financial institution. The usual situations are debits made after you cancelled, amounts larger than what you authorized, or withdrawals on the wrong date. You’ll sign a reimbursement declaration stating why the debit was unauthorized.³

The deadline depends on the PAD category. For Personal PADs and Funds Transfer PADs, you have up to 90 calendar days from the date of the debit. For Business PADs, you have 10 business days.¹ Miss the deadline and you lose access to the formal Rule H1 dispute process; after that, you’re negotiating directly with the biller from a weaker position. The 10-business-day Business PAD deadline can expire before many account holders even open their statement, so review bank activity regularly if you have commercial PADs running.

If the Payment Bounces: NSF Fees

When your account doesn’t have enough money to cover a scheduled PAD, the bank will typically reject the transaction and charge a non-sufficient funds fee. Canadian NSF fees used to sit around $45 to $48 at major institutions. New federal regulations now cap NSF fees at $10 on personal deposit accounts held by individuals. The bank cannot charge more than one NSF fee within a two-business-day period on the same account, and it cannot charge an NSF fee at all if the account is overdrawn by less than $10.⁴ The cap applies only to personal accounts; business accounts aren’t covered.

A low-balance alert through your bank’s app is the simplest guard. Set the threshold high enough that you have time to move funds before the next scheduled debit lands.

If Your Account Is in the United States

Rule H1 and the dispute windows above are Canadian rules. If your bank account is in the U.S., recurring debits are governed by Regulation E. The authorization still has to be a signed or similarly authenticated writing, and electronic signatures qualify, so clicking “I agree” on a secure form satisfies the requirement. The company collecting the payment has to give you a copy of the authorization, and the terms must be clear and readily identifiable as a debit authorization.⁵

Regulation E also lets you stop any single preauthorized transfer by notifying your bank at least three business days before the scheduled date, orally or in writing. If you give the order orally, the bank can require written confirmation within 14 days; miss that and the stop order expires.⁶ For a full revocation, once you tell your bank the authorization is no longer valid, the bank must block all future debits from that payee rather than wait for the payee to stop submitting them.⁷

1
Payments Canada. Rule H1 – Pre-Authorized Debits
2
Payments Canada. Pre-authorized debit
3
Financial Consumer Agency of Canada. Pre-authorized debits
4
Canada Gazette. Regulations Amending the Financial Consumer Protection Framework Regulations
5
Consumer Financial Protection Bureau. Preauthorized transfers
6
eCFR. 12 CFR 1005.10
7
Consumer Financial Protection Bureau. Comment for 1005.10 Preauthorized Transfers