New requirements for pre-authorized debits (PADs) have been published in a revised version of the CPA’s Rule H1. The new provisions will improve the availability of information to consumers by establishing mandatory requirements for the Payor’s PAD Agreement that a business or similar organization uses to obtain its customers’ authorization to debit their bank accounts. As a result, all businesses using PADs will need to make some changes to their Payor’s PAD Agreements to reflect these requirements. Full details and model Payor’s PAD Agreements are available in Appendix II of Rule H1.

In addition, the new version of the rule provides a more flexible framework for businesses using PADs (referred to in Rule H1 as Payees) to establish Payor’s PAD Agreements with their clients through an electronic channel, such as the Internet or the telephone.

In addition, a number of other amendments have been made to the rules for PADs, and these are outlined in the Summary of Key Changes.

A transition period is in effect until February 28, 2010 to allow Payees and financial institutions time to make the necessary changes. Payor’s PAD Agreements in effect before that date are grandfathered and remain valid to avoid inconvenience to Payors and Payees.