Collecting loan repayments by pre-authorized debit in Canada
Repayments by pre-authorized debit run on the borrower's signed agreement. A change in the instalment needs notice at least 10 days before it.
Updated November 3, 2026
What EFT Rails does
EFT Rails sends each repayment when your loan system creates it and keeps the repayment's status available for reconciliation. You can create a pre-authorized debit (PAD) through the API or in the dashboard. Scheduling stays with your loan system, which creates each instalment according to the loan.
You hold the PAD agreement with your customer.
Add your own reference, such as the loan number, and it comes back unchanged with the payment. Your loan system can also request only the payments that have changed since its last check. The API reference documents these operations.
For the outgoing side of the loan, see loan disbursement by EFT. The lender overview covers both collection and disbursement.
Get the borrower's agreement
The borrower's agreement is the authority for collecting repayments from their account. Repayments of loans and lines of credit drawn on a consumer's account are personal PADs.1 Every PAD needs the borrower's PAD agreement, containing the required elements.2
State the timing as set intervals, one-time or sporadic. State whether the amount is fixed, variable or both, and include any conditions that apply to the amount.3 Set intervals can include debits triggered by an event named in the agreement, such as each advance on a line of credit, when the agreement describes the event unambiguously.4
Match the clause to the loan product. A fixed instalment loan fits a fixed amount at set intervals. An interest-only or rate-linked loan fits a variable amount at set intervals, with pre-notification before each debit after the first. Extra payments the borrower approves one at a time fit a sporadic clause.
Build the required terms into your PAD agreement, and see sporadic PADs for individually approved payments.
Tell the borrower before a debit
Notices tell the borrower when collection starts and when an upcoming repayment will differ. Confirmation is the notice before the first debit. Send it at least 10 calendar days before that debit. The borrower may waive confirmation or shorten the period. When it is waived, confirmation is due within 5 calendar days after the first debit.5
For fixed or variable debits recurring at set intervals, a change in amount needs no new authorization when pre-notification of the change is given. This covers a rate change, a top-up and other adjustments.6 pre-notification states the amount and date. Give it at least 10 calendar days before a change to a fixed amount or to the payment dates, and before every variable-amount debit after the first.7
Pre-notification is unnecessary when the agreement specifically provides for the borrower directly asking you to change the amount, such as by a telephone instruction. You and the borrower may also agree to reduce or waive pre-notification. Display any reduction or waiver clause prominently, using bold print, highlighting or underlining.8
Set these notice steps in your loan system's workflow using the pre-notification guide.
When a repayment comes back
A returned repayment can qualify for one further attempt under the original agreement. A repayment returned for non-sufficient funds (NSF), return code 901, or for funds not cleared, return code 908, can be presented again once within 30 calendar days. Use the original amount and add nothing to it.9
Schedule the second attempt for the borrower's next pay date inside that period. A returned repayment appears as returned in both the API and the dashboard, so your loan system can update the repayment status and start your return workflow.
Keep any fee decision separate from the re-presented amount and review the rules for PAD NSF fees. The NSF returns guide covers the operational steps.
When the borrower disputes or cancels
A borrower can claim a personal PAD back up to and including 90 calendar days after it was debited. The grounds are that the debit did not follow the agreement, the agreement had been revoked, or a required notice was not given.10 Keep the agreement, notices and debit history consistent so you can respond to a claim. See PAD dispute windows for the claim process.
When a borrower cancels, stop issuing new debits within 30 calendar days of receiving the notice. A further debit requires a new agreement.11 Cancelling the PAD agreement ends this collection method. The loan itself remains in place, so update the loan account and arrange another repayment method with the borrower.
Keep the records
Keep an audit trail that connects each repayment to its authority. Retain the PAD agreement and evidence of authorization for at least 12 months after the last debit.12 Keep notices and cancellation records with the same loan file so the collection history can be reviewed as a whole.
Sources (12)
- Rule H1, section 5(n) ↩
- Rule H1, section 15(a)(i) ↩
- Rule H1, section 15(a)(ii); Rule H1, section 15(a)(v) ↩
- Rule H1, section 5(t); Rule H1, Appendix II, "Amount, Timing or Specified Event/Action" ↩
- Rule H1, section 16 ↩
- Rule H1, section 15(a)(vi) ↩
- Rule H1, section 17 ↩
- Rule H1, section 18; Rule H1, section 19 ↩
- Rule F1, Part III, "Re-presentment and Rejected Returned Transactions"; Rule H1, section 22(c) ↩
- Rule H1, section 24 ↩
- Rule H1, section 30(a) ↩
- Rule H1, section 21 ↩
Questions
Do I need a new agreement when the interest rate changes?
No new authorization is required for a change in the amount of fixed or variable PADs recurring at set intervals, including a change caused by an interest rate adjustment, provided you give pre-notification.1 The existing agreement must provide for fixed or variable amounts.
How much notice does a borrower get before a repayment changes?
Pre-notification states the amount and date and goes at least 10 calendar days before a change to a fixed amount or to payment dates. It also goes before every variable-amount debit after the first.2 Notice is unnecessary for a borrower-requested change where the agreement specifically provides for it, and the parties can agree to reduce or waive pre-notification with a prominently displayed clause.3
Can I try a returned repayment again?
A repayment returned for NSF with return code 901 or funds not cleared with return code 908 can be presented again once within 30 calendar days.4 Use the original amount with nothing added. The borrower's next pay date inside that period is the practical date for the second attempt.
How long can a borrower dispute a repayment?
A borrower can claim a personal PAD back up to and including 90 calendar days after the debit.5 The claim can be based on a debit that did not follow the agreement, an agreement that had been revoked, or a required notice that was not given.
What happens when a borrower cancels the PAD agreement?
Stop issuing new debits within 30 calendar days of receiving the cancellation notice. You need a new agreement before debiting again.6 The cancellation ends PAD collection, while the loan itself remains in place.