Pre-Authorized Debits (PAD)

On February 28, 2010, the Canadian Payments Association introduced Rule H1 to protect consumers from unauthorized debits from their account and provide recourse should it occur.

Manufacturers have various methods of incorporating the provisions of the Rule H1 into their current procedures including leveraging account applications, creating stand-alone agreements and simplifying prospectuses, and transaction confirms.

The only process not covered is when a dealer instructs a mutual fund company to set up a direct PAD with their client on a nominee account.  FundSERV has developed an agreement to allow for this process to continue.

The dealer must show they have provided the client with their rights and recourses regarding the debit plan under Rule H1.  The dealer must also show the mutual fund company is indemnified from that recourse, provided the mutual fund company has acted only upon the instruction provided by the dealer.

CPA Rule H1 (PAD) Distributor Acknowledgement and Indemnity Form

Participating Companies in CPA Rule H1