It is important to note that reimbursement applies only to the payment itself; it does not cancel or affect any financial obligation between the parties for goods or services obtained.

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Does the Payee still need to distinguish between Personal and Business PADs in the Payor’s PAD Agreement, if they allow the recourse time limit to extend to 90 days for its business customers?

As the PAD Category is a mandatory element as set out in Appendix II of Rule H1, it must be identified in each PAD Agreement. (See Rule H1, Appendix II.)

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Can the type of PAD (Personal or Business) be identified in advance by the Payee? Or, must it be left to the Payor to identify the nature of the underlying contract to which the PAD applies?

The Payee can pre-populate the PAD Category field. In this scenario, the Payor would signify his/her consent to such upon signing a paper PAD agreement. In the case of an electronic Payor’s PAD agreement, the PAD category would be confirmed with the Payor through the script or the electronic forms and would also be identified in the written Confirmation.

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Can I mask my client’s bank account number when providing the written confirmation for an electronic agreement, or in other correspondence?

Yes, it is acceptable to partially mask or truncate account numbers.  The ideal balance would be to provide enough information to enable the Payor to understand the details of the PAD, while ensuring that enough of the bank account number is masked to mitigate security and privacy concerns.

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What can I do if a PAD to my customer’s account is returned NSF? Can I debit the account again? Can I apply NSF charges to the next debit?

If a PAD is returned due to insufficient funds, the biller may re-present the payment item only once, and this must be done within 30 days of the original transaction date.  If the biller chooses to re-present the PAD that was returned NSF, the PAD must be for exactly the same amount as the original transaction (i.e. it cannot include service fees charged by the biller).

However, if the Payor's PAD Agreement provides for variable amount PADs, the Payee may add NSF charges to the outstanding balance the next time a PAD is withdrawn from the Payor's account, provided the pre-notification provisions are satisfied.  Take for example a Payor's PAD Agreement that provides for variable amount PADs reoccurring on the 15th of every month; if on January 15th a PAD of $100.00 was returned NSF, the Payee would have the right to debit the account on February 15th for $200.00 plus NSF charges (i.e. for the outstanding balance plus NSF fees).  On the other hand, if the Payor's PAD Agreement provides for a Fixed Amount PAD reoccurring on a fixed date (the 15th of every month), the Payee's only recourse within the clearing system would be to re-present the PAD (without NSF charges) one time only (i.e. for $100.00 in the example above) within thirty days.

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Can the mandatory element of “Amount” on the Payor's PAD Agreement state that the PAD amount may vary from month to month, according to the Amount Due on the most recent Billing Statement? Is the variable amount PAD pre-notification still required in this case?

Yes, the Payor’s PAD Agreement can fulfill the mandatory requirement for “Amount” by stating that the amount will vary from month to month. Pre-notification is required unless the Payor agrees to waive this in the Payor’s PAD Agreement.

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How much advance notice is required for a Payee to cancel a PAD Agreement?

The intent of the Rule is that the maximum advance notice that a Payee can require in its Payor’s PAD Agreement is 30 calendar days. This period should be based on operational requirements to process a cancellation and should normally be significantly less than 30 calendar days. In practical terms, a Payee may specify the advance notice period in business days (e.g. five business days), as long as this period would fall within 30 calendar days. (See Rule H1, Section 27).

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Can you expand on the requirements where a third-party service provider is responsible for the actual debit processing?

The intent of the Rule is to ensure that the Payor knows who is debiting their account (i.e. that the Payor can recognize the name appearing on their account statement). Thus, if the service provider’s name would be shown on account statements as the originator of the PAD, the Payee would need to disclose this arrangement in the Payor’s PAD Agreement.

The intent is not to require the Payee to disclose all legal agency agreements it may enter into with processors, where there is no effect to the Payor. (See Rule H1, Appendix II, Supplementary Elements for further details).

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If the Payor submits a request to change their bank account information, is a new Payor's PAD Agreement required? Can there be a section on the Payor's PAD agreement that is specific for a change in the existing PAD agreement?

The account number on which a PAD is drawn is a mandatory element of the Payor’s PAD Agreement. If the account number changes, the Payee must have the Payor’s authorization for this amendment to the agreement.*  This authorization may be achieved either by establishing a new agreement with the Payor, or by obtaining an instruction from the Payor to change the account. As this instruction would be an amendment to the original Payor’s PAD Agreement, the Payee would need to retain it along with the original agreement while the amended Payor’s PAD Agreement remains in effect and for at least one year after drawing the last PAD to which it applies, in accordance with Section 18 (a) of Rule H1.

*Account number changes may also be communicated to the Payee via a Notice of Change (NOC).  NOCs are used by a Payor's FI to communicate changes in routing information to a Payee's FI, so that the Payee can update their records accordingly.  Payees are required to act upon NOCs; no separate authorization from the Payor is required.

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If we have a client with an existing PAD Agreement for a particular good and/or service, and the client signs up for an additional good and/or service, can the charges for this new good and/or service be added to the existing PAD Agreement?

Adjustments to the amount of an existing PAD Agreement are permitted, provided that Pre-notification and audit trail requirements are met.

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