Pre-Authorized Debits (PADs) are increasingly used by Canadian landlords to automate rent collection, but unlike informal payment options, PADs are governed by formal banking rules that landlords must follow to stay compliant and avoid disputes. In Canada, PADs operate under Payments Canada’s Rule H1, the official regulatory framework that outlines authorization, notice, cancellation, dispute, and record retention requirements for recurring bank withdrawals. You can view the official regulation here.
What Is Rule H1 & Why It Matters
In short, Rule H1 outlines the official standard set by Payments Canada that applies to recurring and one-time PADs initiated from Canadian bank accounts. This rule dictates how landlords or property managers (and their rent collection processors) can legally withdraw funds from a tenant’s bank account for scheduled payments.
Written Authorization Is Required
One of the most critical PAD requirements is written authorization from the tenant before any debit can be initiated. A compliant PAD agreement must clearly state:
- The tenant’s consent to withdraw funds
- The amount (fixed or an agreed method of calculation)
- The payment frequency and timing
- Who is authorized to withdraw the funds
- The cancellation process
This authorization can be electronic or paper, but it must be documented and retained. Without it, any PAD withdrawal could be reversed by the bank. For this reason, when enrolling in PAD through your Streamline portal, you are required to upload the signed tenant consent form for verification and record-keeping purposes.