NSF fees on pre-authorized debits in Canada

What EFT Rails does

When a pre-authorized debit (PAD) is returned for non-sufficient funds (NSF), you control both the second attempt and any returned-payment fee. EFT Rails sends a debit when you create it, for the amount you set. It does not present a returned debit again or add a fee on its own.

Create the second attempt and the fee debit as separate debits through the API or in the dashboard. The API reference documents the API. A payment can carry your own reference, which comes back with it. Give both debits the reference of the original payment so you can match them to it in your records.

Try the debit again

The second attempt collects the original payment once more. A debit returned for NSF with return code 901, or for funds not cleared with return code 908, can be presented again once within 30 calendar days after the return. If it is dishonoured a second time, you cannot present it again.¹

Keep the second attempt at the original amount. It cannot include your returned-payment fee or any other additional charge.² Your undertaking to your bank states the same restriction: a re-presentment cannot carry interest, NSF charges or other charges on top of the original amount.³

The process for receiving the return and creating the new debit is covered in Handling NSF returns.

Collect the fee as its own debit

A returned-payment fee is collected through its own PAD, with terms written into the customer's agreement. The fee debit requires the customer's PAD agreement, as does any other PAD.⁴

The agreement must state the amount, fixed, variable or both, any conditions that apply to the amount, and the timing.⁵ If an act, event or other criterion triggers the debit, the agreement must describe it unambiguously.⁶

Write the returned-payment fee into the agreement as an amount and identify the return of a debit as the event that triggers it. Then collect the fee as a separate fee debit. The second attempt remains at the original amount. See PAD agreements for the agreement requirements.

Rule H1 must follow the law, including consumer protection law, so the fee term must also follow the law governing your contract.⁷ The bank's own NSF charge to the customer is between the customer and their bank.

Tell your customer before the fee debit

For debits at set intervals, a variable-amount debit after the first requires pre-notification of its amount and date at least 10 calendar days before the debit. The same notice period applies when you change a fixed amount or the payment dates.⁸

See PAD pre-notification for how to provide that notice.

When the agreement says nothing about a fee

A customer can claim back a debit that was taken outside the terms of their PAD agreement. The claim window runs up to and including 90 calendar days after a personal debit and up to and including 10 business days after a business debit. Their bank reimburses them immediately on a best-efforts basis.⁹

The debit then comes back with return code 916 for a personal debit or return code 919 for a business debit. Both codes mean the debit was not according to the agreement.¹⁰

A returned payment shows as returned in EFT Rails. Read more about PAD dispute windows and EFT return codes.