Pre-Authorized Transactions

Pre-authorized debits are revocable payment arrangements between members and payees (e.g., insurance companies, financial institutions, strata corporations) whereby the member authorizes the payee to deduct payments (e.g., insurance premiums, mortgage/loan payments, investment contributions, strata fees) for a specified amount from the member’s account at regular intervals. Payments are most commonly processed electronically through the payee’s financial institution, although in some cases paper vouchers are still generated.

Members arrange for pre-authorized debits by signing an agreement with the payee (e.g., utility company) and providing a voided cheque to verify the account number. The agreement authorizes the payee to debit the member’s account at specified intervals for a specific amount.

Companies originating pre-authorized payments have signed letters of undertaking with their financial institutions which constitute their acceptance into the Pre-authorized Debit Plan. The payee company provides its financial institution with an electronic file of transactions before each due date. The payee’s financial institution distributes the transactions to the various destination financial institutions for processing on the due date.

Members can make arrangements with third parties (e.g., employers, other financial institutions, governments) for direct deposit of payments (e.g., payroll, pensions) to their accounts on predetermined dates or at regular intervals. The member arranges for direct deposits by signing an agreement with an originator (e.g., employer) which specifies the frequency, the amount and the destination of payment(s).

Companies originating direct deposits have signed letters of undertaking with their financial institutions which constitute their acceptance into the Direct Deposit Plan. Before the due date, the originator provides its financial institution with an electronic file of direct deposit transactions. The originator’s financial institution distributes these transactions to the various destination financial institutions for payment on the due date.

If the member, joint tenant, or attorney of either one, wishes to set up a direct deposit into the recipient’s account:

  1) Have the recipient or their attorney (if properly authorized) complete a Direct Deposit Application form (provided by the credit union) and attach a voided cheque.

  2) Preferably, have credit union staff complete the portion of the form with the credit union’s institution, branch, and account number to ensure that the correct numbers are entered.