Pre-Authorized Payment

A Pre-Authorized Debit (PAD) is a recurring, automatic withdrawal that a mortgage lender initiates from a borrower's bank account on each scheduled payment date, governed by Payments Canada Rule H1. In British Columbia, virtually all residential mortgages require borrowers to sign a PAD agreement at the time of funding, authorizing the lender to pull principal and interest payments directly from a designated account. The first withdrawal date is typically aligned with the mortgage's Interest Adjustment Date (IAD), which is the date from which interest begins to accrue before the first regular payment period starts.

The PAD agreement is signed at mortgage funding — typically as part of the package of documents completed through the borrower's notary or lawyer before the lender releases funds. By signing, the borrower authorizes the lender to withdraw a fixed or variable payment amount from a specified bank account on each scheduled payment date for the life of the mortgage. The agreement must comply with Payments Canada Rule H1, which sets out the required content and the lender's obligations regarding pre-notification and processing.

Under Payments Canada Rule H1, lenders are required to provide borrowers with advance notice before initiating the first PAD withdrawal, specifying the amount, frequency, and start date of the debits. The prescribed pre-notification period must be met before the lender can legally process the first withdrawal from the borrower's account. Borrowers should review the notice carefully to confirm the details match their mortgage terms, and any discrepancy should be raised with the lender immediately.

Payments Canada Rule H1 grants borrowers specific reimbursement rights if a PAD is processed without proper authorization or in an amount or on a date that does not match the agreed PAD agreement. A borrower can dispute the debit through their financial institution within the timeframes set out in Rule H1, and the institution is obligated to investigate and, where warranted, reimburse the funds. Borrowers should contact their bank promptly upon discovering an unauthorized or incorrect PAD, as Rule H1 imposes time limits on making such claims.

The Interest Adjustment Date (IAD) is the date from which interest on a BC mortgage begins to accrue, bridging the gap between the mortgage funding date and the start of the first full payment period. The PAD agreement aligns the first automatic withdrawal with this date so that any interest accrued between funding and the IAD is collected before regular amortized payments begin. Understanding the IAD is important for BC borrowers because a longer gap between funding and the IAD can result in a larger-than-expected initial PAD withdrawal.

Yes, borrowers can generally request changes to their PAD withdrawal date or the designated bank account by contacting their lender directly, though the lender's specific policies and any applicable notice requirements under Payments Canada Rule H1 will govern the process. The lender will typically require the borrower to complete a new or amended PAD agreement before any change takes effect. Borrowers should confirm with their lender how much advance notice is required to avoid a missed or misdirected payment.

No — the PAD agreement is a banking and lending arrangement between the borrower and the mortgage lender, and falls outside the scope of a real estate licensee's role under the Real Estate Services Act (RESA) and its Rules as administered by the British Columbia Financial Services Authority (BCFSA). A licensee may explain the general concept of PADs to a buyer client as part of educating them about the purchase process, but the licensee must not provide mortgage or financial advice and must refer the client to their lender or a licensed mortgage broker for specifics. Licensees should also be aware that handling client bank account information triggers obligations under BC's Personal Information Protection Act (PIPA).

In BC, strata corporations collect monthly maintenance fees (strata fees) from owners under the authority of the Strata Property Act (SBC 1998, c. 43), and many strata corporations offer PAD arrangements to make fee collection more efficient. A PAD for strata fees is a separate agreement from the mortgage PAD — it is set up between the owner and the strata corporation or its property manager, and is also governed by Payments Canada Rule H1. Owners should ensure both PADs are independently managed and that sufficient funds are available in their account to cover both withdrawals on their respective due dates.

When a BC property owner dies, the legal authority to operate bank accounts and manage the mortgage transfers to the executor or administrator of the estate, as governed by the Wills, Estates and Succession Act (WESA) of BC. The existing PAD arrangement may continue to process automatically from the deceased's account until the estate is settled or the lender is notified, which can create complications if account access is restricted. The executor should notify the lender as soon as practicable to confirm how mortgage payments will be handled during the estate administration period.

Foreclosure in British Columbia is a judicial process governed by the BC Supreme Court Civil Rules and the Law and Equity Act — there is no power-of-sale process as exists in some other provinces. Once a lender commences foreclosure proceedings, the borrower should seek independent legal advice immediately, as the practical continuation of PAD withdrawals during litigation will depend on the terms of the mortgage contract and any court orders made in the proceeding. Borrowers should not assume that continued PAD withdrawals mean the lender has abandoned the foreclosure action, and should confirm the status of all payment obligations with their lawyer.