PayPal used unfair contract terms for small businesses, court finds

The news: PayPal Australia used unfair contract terms in standard form agreements with small businesses, the Federal Court of Australia has found, following legal action brought by the business watchdog.

The context: Federal Court Justice Mark Moshinsky found PayPal Australia’s contract terms were unfair because it kept fees it mistakenly charged to small businesses that failed to notify the company of the error within 60 days of the charge appearing on a bank statement.

The Australian Securities and Investments Commission (ASIC) announced its legal action against PayPal Australia in September 2023, claiming the length of the contract allowed PayPal to escape consequences for its own mistakes in overcharging small businesses.

PayPal agreed that the clause was unfair and consented to court declarations highlighting its breach of the ASIC Act, after voluntarily removing the clause from its contracts on 8 November 2023.

The terms of the contract that were part of ASIC’s filing affected small businesses that opened a PayPal business account between 21 September 2021 and 7 November 2023.

As of June 30, 2023, more than 600,000 small businesses had PayPal business accounts, according to ASIC.