20 Sep Don’t Forget About Your Pre-Authorized Debit Agreement

When a merchant signs a credit or debit card processing agreement, they also sign a Pre-Authorized Debit (PAD) agreement that allows the processor to deposit and withdraw funds from the business bank account.

What many business owners don’t realize is that ending the processing contract does not necessarily mean the PAD authorization has automatically been cancelled. If you switch processors or your agreement expires, it is important to address the PAD authorization separately.

We have encountered situations where businesses continued making payments to a former processor for years after their processing agreement had ended—sometimes related to equipment that had not been returned.

Regardless of the circumstances, you generally don’t want a company you are no longer doing business with to retain authorization to access your business bank account.

At FeeAdvocates, when our clients change processors, we have them sign cancellation forms specifically revoking their PAD agreements. It’s a simple step that helps ensure the old processor no longer has authorization to debit their account.

Changing processors? Don’t just cancel the processing agreement. Make sure the PAD authorization is cancelled too.

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