Business or personal PAD
The purpose of a pre-authorized debit sets its category. A Personal PAD carries a claim window of up to and including 90 calendar days after the debit. A Business PAD carries up to and including 10 business days.
Updated November 3, 2026
What EFT Rails does
You hold the PAD agreement with your customer. A returned payment shows as returned; the API reference describes the payment data.
Open an account
Four categories
A pre-authorized debit (PAD) collects a payment under the payor's agreement, and its category records the payment's purpose. The four categories are Business PAD, Personal PAD, Cash Management PAD and Funds Transfer PAD.1
A Business PAD pays for goods or services connected with the payor's business or commercial activity. Payments from franchisee to franchisor, distributor to supplier and dealer to manufacturer fit this category, and a business includes a sole proprietorship.2
A Personal PAD covers consumer payments. These include donations, mortgage instalments, utility bills, insurance premiums, membership fees, property taxes, credit card bills, lines of credit, loans and other consumer goods or services, along with payments outside the other three categories.3
A Cash Management PAD moves a business's own money between its accounts at two banks, or between closely affiliated businesses such as a parent company and its subsidiary. A Funds Transfer PAD moves an individual's own money between their accounts at two banks, including transfers into a registered savings plan or mutual fund.4
The pre-authorized debit guide covers the collection process.
Side by side
The category determines the transaction type you send and the claim window that follows.
| Category | Who pays for what | Transaction type | Claim window |
|---|---|---|---|
| Personal PAD | An individual pays for consumer goods, services, bills, donations or borrowing.3 | 260 to 272, 323 or 330 to 599.5 | A claim that the debit departed from the agreement, followed revocation or lacked a required notice can be made up to and including 90 calendar days after the debit.6 |
| Business PAD | A payor, including a sole proprietor, pays for goods or services for business or commercial activity.2 | 700 to 749.5 | The same grounds carry a window up to and including 10 business days after the debit.6 |
| Funds Transfer PAD | An individual moves their own money between accounts at two banks.4 | 650 where the bank offers no recourse beyond a claim that no agreement existed. Otherwise 260 to 272, 323 or 330 to 599.5 | The claim window is 90 calendar days after the debit. A debit coded 650 or 83 can be returned through the clearing only for a claim that no agreement existed.7 |
| Cash Management PAD | A business moves its own money between banks, or between closely affiliated businesses.4 | 420 or 717.5 | A dispute is addressed outside the rules, apart from a claim that no agreement existed.8 |
Classifying a payment
Classify a debit by what the payment is for. The account holder's identity or signature does not decide the category.
A sole proprietor's payment for business supplies is a Business PAD. The same person's home insurance premium is a Personal PAD. A commercial tenant's rent payment to a landlord is a Business PAD, while a residential tenant's rent payment is a Personal PAD.
A mixed debit takes the Personal treatment when any portion combines a Personal PAD or Funds Transfer PAD with a Business PAD or Cash Management PAD. Its transaction type is 260 to 272, 323 or 330 to 599.5 For the claim windows, Personal PAD also covers a debit mixed with another category and one wrongly coded as Business.9
The file format guide shows where transaction types belong in a file.
Getting the code wrong
Wrong coding leaves a consumer's full claim window intact. A payor can claim back a PAD that departed from the agreement, came after the agreement was revoked or lacked a required notice for up to and including 90 calendar days after a Personal PAD or Funds Transfer PAD was debited, even when it was coded as Business. A Business PAD carries up to and including 10 business days.6
Coding a consumer's debit as Business does not shorten their window. The payor's bank applies 90 days anyway, because the claim rules treat a miscoded Personal PAD as Personal.9
For any category, a claim that no agreement existed at all can be made within 90 calendar days of the posting date shown on the account statement.10 The PAD dispute windows guide sets out the deadlines and their starting points.
Where the category appears
The category is recorded with the payor's authorization and the notice sent before collection. The PAD agreement must state its category, and the pre-debit confirmation sent before the first debit marks it business or personal.11 The PAD agreement guide explains what the agreement contains.
Cash Management PADs use a different location for the authority: the payor's authority to debit sits inside the Payee Letter of Undertaking itself.12
Sources (12)
- Rule H1, section 1 ↩
- Rule H1, sections 5(b) and 5(c) ↩
- Rule H1, section 5(n) ↩
- Rule H1, sections 5(d) and 5(g) ↩
- Rule H1, section 20 ↩
- Rule H1, section 24 ↩
- Rule H1, section 24; Rule H1, Appendix III, "Funds Transfer PADs bearing transaction type" ↩
- Rule H1, section 26 ↩
- Rule H1, Appendix III, "commingled" ↩
- Rule H1, section 23 ↩
- Rule H1, Appendix II, "PAD Category"; Rule H1, Appendix IV ↩
- Rule H1, Appendix I, paragraph 4 ↩
Questions
What is the difference between a business and a personal PAD?
A Business PAD pays for goods or services connected with the payor's business or commercial activity, including the activity of a sole proprietor.1 A Personal PAD pays for consumer items such as household bills, insurance, donations, borrowing and other consumer goods or services.2
Is a sole proprietor's PAD business or personal?
A sole proprietorship counts as a business, so its payment for business goods or services is a Business PAD.1 The same person's home insurance or another consumer payment is a Personal PAD. Classify by the payment's purpose.
How long can a customer dispute each?
For a debit that departed from the agreement, followed revocation or lacked a required notice, a Personal PAD or Funds Transfer PAD carries up to and including 90 calendar days after the debit. A Business PAD carries up to and including 10 business days.3
What happens if I code a personal PAD as business?
The customer keeps the 90-calendar-day window even when the debit was coded as Business.3 The claim rules treat a miscoded Personal PAD as Personal, and the payor's bank applies the longer window.4
Which transaction codes go with each?
Business PADs use 700 to 749, and Cash Management PADs use 420 or 717. A Funds Transfer PAD uses 650 where the bank offers no recourse beyond a claim that no agreement existed; Personal PADs, mixed PADs and other remaining PADs use 260 to 272, 323 or 330 to 599.5
Is a transfer between my company's own bank accounts a Business PAD?
No. A transfer of a business's own money between its accounts at two banks is a Cash Management PAD. Its transaction type is 420 or 717.6
Can a business customer request reimbursement after 10 business days?
Yes. For any category, a claim that no agreement existed at all can be made within 90 calendar days of the posting date shown on the account statement.7
Does a PAD from a personal bank account have to be a Personal PAD?
No. Classify the PAD by the payment's purpose. A sole proprietor's payment for business supplies is a Business PAD, while the same person's home insurance premium is a Personal PAD. A sole proprietorship counts as a business.1