Handling NSF returns on pre-authorized debits in Canada

What EFT Rails does

EFT Rails shows a returned payment as returned in the API and in the dashboard, so you can identify the debit and decide what to do next. Your system can request only the payments that changed since its last check.

EFT Rails does not present a debit again on its own. A second attempt is a new debit that you create for the same amount, on the banking day you name or the earliest banking day available. You can create and read payments through the API or in the dashboard; the API reference documents the API.

Your own payment reference comes back unchanged. Give the second attempt the original payment's reference so the two debits remain connected in your records.

When a debit comes back NSF

An NSF return means the customer's bank did not pay the debit because the account did not have sufficient funds. Return code 901 means non-sufficient funds (NSF) and applies to debits, while return code 908 means funds not cleared and also applies to debits. Both belong to the dishonoured transaction group numbered 900 to 914, and the customer's bank raises the return.¹ The EFT return codes guide explains the other codes.

A pre-authorized debit (PAD) dishonoured for NSF, a stop payment or a closed account must be returned no later than the business day after the first part of the bank able to make or act on that decision receives it.² The banks settle the debit on the business day after its Due Date.³

Try the debit once more

You can try the debit again when it carries return code 901 or 908. It may be presented again once, within 30 calendar days of the return, and a second dishonour ends the right to present it again.⁴

The second attempt must be for the same amount as the original debit, with no charges added. Your undertaking to your bank states the same restriction and names interest and NSF charges.⁵ A fee for the return is a separate debit, and your PAD agreement must provide for it. The guide to PAD NSF fees covers that separate charge.

Other return codes do not carry the right to present the debit again. That right applies to 901 and 908.⁴

What to do after an NSF return

1. Match the return to the payment. Find the payment marked returned in the API or dashboard. Use your own reference to connect it to the original debit and to the customer's records.

2. Decide whether to try again. Check that the return code is 901 or 908 and that the second attempt will fall within 30 calendar days of the return.⁴ Choose a day when the customer's money is known to arrive, within that period.

3. Tell the customer the date. Give the customer the date of the second attempt before you create it.

4. Create the second attempt for the same amount. Add nothing to the original amount.⁵ You create the debit. EFT Rails sends it on the banking day you name or the earliest banking day it can. Carry the original payment's reference onto the new debit.

5. Stop presenting the debit after a second dishonour. A debit dishonoured on the second attempt cannot be presented again.⁴ Continue collection under your agreement, outside the payment rules.

If your customer disputes it later

A second attempt does not remove the customer's right to claim the PAD back on the permitted grounds. For a personal debit, that right runs up to and including 90 calendar days after the debit. For a business debit, it runs for 10 business days after the debit.⁶ The PAD dispute windows guide sets out those periods and their starting points.