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PAD payments

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedJul 20242 min read

Notifying your customer of payments

You must give the customer "Pre-Notification" before collecting a Pre-Authorized Debit payment. The PAD rules require you to inform your customers of each payment before it leaves their account.

Pre-Authorized Debits at set intervals

For paper PAD agreements:

If payments are for a fixed amount, then you must give written notification of the amount to be debited and the date(s) of payment, at least 10 calendar days before the due date of the first Pre-Authorized Debit payment. The confirmation period can be reduced or waived, but this must be agreed with the customer first.
If the payments are for variable amounts, then you must give customer written notification at least 10 calendar days before the due date of each and every Pre-Authorized Debit payment. This confirmation period can be reduced or waived, as above.
Before changing agreed amounts or payment dates, you must give written notice of any change at least 10 calendar days before taking the next payment.

For fixed amounts taken at set intervals, such as subscriptions, you only need to send notification prior to the first PAD payment. Despite this, it’s a good idea to remind customers when payments will be taken from their account.

For electronic agreements:

If payments are a fixed amount, you must give written confirmation of the agreement at least 15 calendar days before the due date of the first Pre-Authorized Debit payment. This confirmation period can be reduced to a minimum of 3 calendar days, if the payee verifies the identity of the Payor. Verification must use information known only to the Payor and the Payee.
If payments are a variable amount, customers must receive written confirmation of the agreement at least 15 calendar days before the first PAD payment is due. You must also give customers written notification at least 10 days before the due date of each subsequent payment.
Before changing the agreed amount or payment dates, you must give the customer written notice at least 10 calendar days before taking the next payment.

Exceptions

The pre-notification period for changes to variable amount debits is 10 calendar days by default (for both paper and electronic agreements), except in the following cases:

the customer and merchant mutually agree to specifically reduce or waive this period
the customer directly instructs you to change the amount.

If you include a clause to reduce or waive the confirmation period or the standard 10 day pre-notification period in the Pre-Authorized Debit agreement, it must be prominent to ensure the customer is aware of it. Authorization to reduce or waive the standard periods may also be obtained by a separate waiver.

Submitting payment requests to the banks

After your customer has signed the PAD agreement, you can collect payment by notifying the customer and submitting a payment request to ACSS via your bank. Your bank will credit your account on the day payment is due, while your customer's bank debits theirs at the same time. The two banks will then settle up between themselves.

Post-submission

For successful payments, your bank will credit your account. But if a payment fails, then you’ll receive a message from ACSS with details of the failure.

Payment failure notifications

If a payment fails due to non-sufficient funds, the bank will notify you by sending a file. Once you receive the file, you’ll then need to reconcile it against the payments requests you’ve already submitted. You can retry failed payments only once within the 30 days following the return of the original payment. The second payment can only be retried for the same amount as the original payment.

Collecting payment when no agreement exists

You must always set up a Pre-Authorized Debit agreement with your customer before collecting any payments. In addition, you must wait 10 calendar days for a paper agreement and 15 calendar days for an electronic agreement before submitting the first payment request. These waiting times can be reduced in certain circumstances.