Payments

CPA-005 PAD files explained: collecting mortgage payments by pre-authorized debit

How Canadian private lenders collect payments by PAD: the CPA-005 file standard, PAD agreements under Payments Canada Rule H1, returns and NSFs, and how to keep it from becoming a monthly spreadsheet job.

Pre-authorized debit (PAD) is the most reliable way to collect monthly mortgage payments in Canada. Most banks let you submit PADs in bulk by uploading a CPA-005 file through business online banking.

What’s in a CPA-005 file

CPA-005 is Payments Canada’s standard for Automated Funds Transfer (AFT) files. A file contains:

  • A header record identifying your organization (the originator ID your bank assigns) and a file creation number that must change with every file.
  • Debit records — one transaction per borrower payment: amount, due date, the borrower’s institution, transit and account number, and your cross-reference (such as the loan number).
  • Credit records if you also pay out (for example, investor distributions by EFT).
  • A trailer record with counts and totals so the bank can check the file.

Your bank also needs the account the money settles into, and a short name that appears on borrowers’ statements.

PAD agreements and Rule H1

Before you debit a borrower’s account you need their authorization under Payments Canada Rule H1 — usually a signed PAD agreement kept on file, with pre-notification of amounts and dates and the borrower’s cancellation and recourse rights. Changes to the amount or account generally need a new agreement or notice.

Debit dates and business days

Debits are processed on business days. A payment due on a weekend or statutory holiday is debited on the next business day — and your file must use the date the bank will actually process.

Returns and NSFs

Some debits come back: insufficient funds, account closed, payment stopped. The bank reports returns separately. Each one should:

  1. Reverse the payment on the loan.
  2. Charge the NSF fee the mortgage allows.
  3. Notify the borrower.
  4. Start your collections follow-up — and decide whether to re-present the debit or rely on a payment arrangement.

How Amortivo handles it

Amortivo builds the CPA-005 debit file from each loan’s payment schedule, adjusts for business days, includes re-presentments of returned items when you choose, and records settlements and returns against each payment — a return opens a collections case automatically. Distributions to investors use a CPA-005 EFT credit file. See loan servicing.

Common questions

What is a CPA-005 file?

The Payments Canada standard file format for Automated Funds Transfer (AFT). Banks accept CPA-005 files to process pre-authorized debits (PADs) and direct-deposit credits in bulk.

Do I need a PAD agreement from each borrower?

Yes. Under Payments Canada Rule H1, a payor must authorize pre-authorized debits, typically through a signed PAD agreement that you keep on file, with the notice and cancellation terms the rule requires.

This guide is general information for Canadian private lenders, not legal, tax or accounting advice. Confirm requirements with your regulator, lawyer or accountant.

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