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PayPal Australia’s unfair contract clause: Court rules in favour of small businesses

Posted on by angelo

An Australian court has found PayPal’s local entity guilty of using a clause in its contracts that disadvantaged small businesses. In its ruling, the court declared that the unfair terms were void from the outset of the contract and ordered the payments giant to refrain from applying or enforcing them.

The move comes as the Australian Securities and Investments Commission (ASIC) filed a lawsuit against PayPal in September, alleging unfair terms in contracts with small businesses. The court also ordered the payments company to pay the regulator’s legal costs.

“Today’s decision is a reminder to all businesses that unfair contract terms in small business standard contracts will not be tolerated and ASIC will take decisive action where appropriate to protect the rights of consumers and small businesses,” ASIC Deputy Chair Sarah Court said.

An abusive clause

PayPal’s Australian subsidiary has given small businesses 60 days to notify them of any errors or discrepancies in fees charged by the payment platform. Once the 60-day period has passed, small businesses must accept the fees as accurate.

The court has now ruled that the terms were unfair because PayPal allowed small businesses to keep overcharged or incorrectly charged fees if they did not report the charges within 60 days of them appearing on their account statement. The judge also noted that small businesses were unable to manage the risk of being incorrectly charged or overcharged.

The abusive clause appeared in PayPal’s contracts between September 21, 2021 and November 7, 2023. The company also acknowledged that the clause was abusive and removed it from its contracts on November 8, 2023.

As of June 30, 2023, PayPal had more than 600,000 business accounts. The court also found that PayPal was not aware of any instances where it had caused loss or harm to small businesses by relying on the fee error clause. The regulatory investigation also failed to find any such instances.

An Australian court has found PayPal’s local entity guilty of using a clause in its contracts that disadvantaged small businesses. In its ruling, the court declared that the unfair terms were void from the outset of the contract and ordered the payments giant to refrain from applying or enforcing them.

The move comes as the Australian Securities and Investments Commission (ASIC) filed a lawsuit against PayPal in September, alleging unfair terms in contracts with small businesses. The court also ordered the payments company to pay the regulator’s legal costs.

“Today’s decision is a reminder to all businesses that unfair contract terms in small business standard contracts will not be tolerated and ASIC will take decisive action where appropriate to protect the rights of consumers and small businesses,” ASIC Deputy Chair Sarah Court said.

An abusive clause

PayPal’s Australian subsidiary has given small businesses 60 days to notify them of any errors or discrepancies in fees charged by the payment platform. Once the 60-day period has passed, small businesses must accept the fees as accurate.

The court has now ruled that the terms were unfair because PayPal allowed small businesses to keep overcharged or incorrectly charged fees if they did not report the charges within 60 days of them appearing on their account statement. The judge also noted that small businesses were unable to manage the risk of being incorrectly charged or overcharged.

The abusive clause appeared in PayPal’s contracts between September 21, 2021 and November 7, 2023. The company also acknowledged that the clause was abusive and removed it from its contracts on November 8, 2023.

As of June 30, 2023, PayPal had more than 600,000 business accounts. The court also found that PayPal was not aware of any instances where it had caused loss or harm to small businesses by relying on the fee error clause. The regulatory investigation also failed to find any such instances.