ACH for US vs. Canadian merchants

Understanding the nuances of bank payments is important, especially as Helcim serves businesses in both the United States and Canada. While Helcim's ACH (Automated Clearing House) payment processing is country-specific, you might have questions if your business operates in both countries.

This article clarifies key terms Helcim uses, like 'ACH' and 'Pre-Authorized Debit (PAD) Agreements,' and outlines the distinct rules for US ACH processing and Canadian PAD processing within our system.

In this article

• Getting the terms straight: ACH, EFT, and PADs

• Who makes the rules?

• Key differences you need to know

• Focus on Canada: Essential PAD rules

• How this affects using your Helcim tools

• Next steps

• FAQs

Getting the terms straight: ACH, EFT, and PADs

You'll hear a few terms used, and here’s how they generally fit together, especially within the Helcim ecosystem:

• ACH (Automated Clearing House) Payment: This is the primary term Helcim uses to describe the payment method of direct bank-to-bank transfers. It’s the standard term in the U.S.

• EFT (Electronic Funds Transfer): This is a common, broader term in Canada that covers various electronic payments, including direct bank account debits. When you use Helcim's ACH payment feature with a Canadian customer, it's a type of EFT.

• PAD (Pre-Authorized Debit) Agreement: This is a crucial term for Canada. It refers to the specific authorization agreement you must have with your Canadian customer before you can withdraw funds from their bank account. Helcim’s tools help you create and manage these PAD agreements.

So, while Helcim generally calls the payment method "ACH," when we're talking about the customer authorization document for a Canadian transaction, we'll often refer to it as a "PAD Agreement."

Who makes the rules: NACHA and Payments Canada

Two main organizations set the standards for these types of payments:

• NACHA: This organization governs the ACH Network in the United States. Their rules ensure that ACH payments are processed safely and reliably.

• Payments Canada: This body establishes the rules and procedures for Canada's national payment systems, including EFTs and PADs.

Helcim’s processes are designed to align with these respective rules, helping you stay compliant.

Key differences between U.S. and Canadian bank payments

While the goal of getting paid is the same, the rules that govern bank payments differs by country.

Authorization Rules

• United States: Governed by NACHA rules. Helcim’s tools facilitate obtaining the necessary customer authorization for ACH debits.

• Canada: Governed by Payments Canada's Rule H1 for PADs. These rules are quite specific, especially around obtaining and managing the PAD Agreement.

Regulatory Focus

Canadian PAD rules often have more prescriptive requirements around the agreement itself, cancellation rights, and pre-notification for certain changes.

A focus on Canada: Essential PAD rules

If you're accepting bank payments from Canadian customers, these Payments Canada PAD rules are particularly important. Helcim helps you manage these, but awareness is key:

1. PAD agreement is a must: You absolutely need a compliant PAD Agreement in place with your customer before your first debit. This agreement outlines the terms of the pre-authorized debits.

2. Immediate processing post-agreement: Once your Canadian customer agrees to the PAD Agreement, Helcim can create and process transactions without a mandatory waiting period. The first debit can be initiated as soon as the PAD agreement is successfully established.

3. Notification of changes: If you, as the merchant, edit critical details like the Bank Account Holder Name for a customer's PAD setup within Helcim, we will notify the customer. This is for transparency and security.

4. Customer cancellation rights: Your Canadian customer has the right to cancel a PAD Agreement at any time, typically by providing you (the merchant) with 30 days' notice before the next scheduled debit.

5. Re-authorization after certain returns: If a PAD is returned for specific reasons (like issues with the authorization itself), you will generally need to have the customer complete a new PAD Agreement before you can attempt to debit them again.

How this affects using your Helcim tools

Helcim is built to help you navigate these requirements within your country of operation.

For Canadian merchants using our tools like Invoicing, Recurring Payments, or the Virtual Terminal to set up EFT/PAD payments for a Canadian customer:

• Our system will guide you through generating the necessary PAD Agreement.

• Once the PAD Agreement is in place, payments can be processed immediately.

• Notifications related to changes or upcoming debits are handled according to the rules.

For US merchants, our tools will guide you through setting up ACH payments compliant with NACHA rules for your US-based customers.

Next steps

Understanding these distinctions is the first step. Now, you're better prepared to set up and manage ACH payments smoothly for all your customers.

• Ready to set things up? Visit our article on how to enable and use ACH payments.

• Want to know more about when funds arrive? Read our article on ACH settlement times and batch settings.