PayPal Australia loses lawsuit over unfair fees affecting small businesses : Tech : Tech Times

PayPal Australia has been found guilty of including an unfair term in its standard contracts with its small business customers.

The court case, initiated by the Australian Securities and Investments Commission (ASIC) last September, reveals how the term has had an unfair impact on small businesses by placing the burden on them to detect and report overcharging errors.

Australian court finds PayPal guilty of unfair terms

The controversial term required small business customers to report any overcharging errors within 60 days or accept the charges as accurate.

This provision was deemed unfair because it penalised small business customers who failed to detect and report billing errors in a timely manner.

ASIC argued that such a delay was unreasonable, given that small businesses often do not have the resources or systems in place to easily identify such errors.

Court’s findings: a closer look

Justice Moshinsky, who presided over the case, concluded that the clause was indeed unfair. He noted that small businesses were unable to effectively manage the risk of incorrect or excessive billing.

The court acknowledged that the account statements provided by PayPal did not clearly describe the different types of fees or how they were calculated, making it difficult for small businesses to reconcile the fees.

Judge Moshinsky noted that “unlike PayPal, small businesses were not in a position to manage the risk of incorrect or excessive billing.”

He also noted that the 60-day notification period was insufficient to allow small businesses to accurately detect and report errors.

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The court’s ruling applies to small businesses that opened a PayPal business account between September 21, 2021, and November 7, 2023.

According to ASIC, as of 30 June 2023, there were more than 600,000 small businesses with PayPal business accounts. This decision is a significant victory for these businesses as it ensures they will not be unfairly penalised for invoicing errors.

PayPal Australia responds

(Photo: ERIC PIERMONT/AFP via Getty Images)

According to Reuters, PayPal Australia acknowledged that the clause was unfair and accepted the court’s ruling. The company voluntarily removed the clause from its contracts on November 8, 2023, even before the court’s ruling.

A PayPal spokesperson said: “PayPal Australia takes its responsibility to its customers very seriously and we have worked fully co-operatively with ASIC on this matter.”

PayPal has also agreed to cover ASIC’s legal costs and has fully cooperated with the regulator throughout the investigation. This cooperation and proactive approach has been welcomed by ASIC.

“Today’s decision serves as a reminder to all businesses that unfair contract terms in standard form contracts with small businesses will not be tolerated,” noted ASIC Deputy Chair Sarah Court.

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