Court rules PayPal contract terms are ‘unfair’ to retailers

A clause in PayPal’s standard contracts with small businesses in Australia – including retailers – has been ruled unfair by the Federal Court.

The move comes after the Australian Securities and Investments Commission (ASIC) launched legal proceedings against the company last September.

Under the clause, business account holders have 60 days to notify PayPal of any errors or discrepancies in the fees the financial platform has charged them, or accept those fees as accurate.

The court found the clause unfair because it allowed PayPal to keep fees it had “erroneously charged” retailers if they failed to notify them of their decision within the 60-day period.

The court also declared the clause void from the outset of the contracts and ordered that PayPal is not permitted to enforce, rely on or apply the clause.

The statements apply to small businesses that entered into a contract with PayPal between September 21, 2021 and November 7 of last year.

The company had previously reached an agreement with Asic and voluntarily removed this clause from its contracts on November 8.