PayPal Australia is unfair to small merchants

The Australian Federal Court has ruled that PayPal’s contract for local small businesses was unfair.

The reason, the court ruled Friday (July 5), is that the terms of the contract allowed PayPal to keep the fees it mistakenly charged if the small business did not notify PayPal of the error within 60 days after the charge appeared on its account statement.

“Today’s decision serves as a reminder to all businesses that unfair contract terms in small business standard form contracts will not be tolerated and ASIC will take decisive action where appropriate to protect the rights of consumers and small businesses,” Australian Securities and Investments Commission (ASIC) Deputy Chair Sara Court said in a press release.

“PayPal Australia takes its responsibility to its customers very seriously and we have worked fully cooperatively with ASIC on this matter,” a company spokesperson said in a statement provided to PYMNTS. “PayPal Australia is not aware of any cases, and ASIC has not found any cases, of business accounts suffering losses due to reliance on the contractual clause, which was removed from our contracts last year.”

ASIC also said it was unable to find any examples of businesses suffering losses due to the length of the contract.

According to ASIC, the court declared the unfair term void and prohibited PayPal from applying, relying on or enforcing it in its contracts with small businesses. The decision applies to small businesses that opened a PayPal account between 21 September 2021 and 7 November 2023, when PayPal removed the term from its contracts.

In other small business news, PYMNTS recently wrote that U.S. small and midsize businesses (SMBs) are growing faster than GDP, something that hasn’t happened in two years.

“The growth of the hospitality sector, which grew by 10% in 2023 compared to 1.5% in 2022, provides an indication of where consumers have shifted their spending, namely towards experiences, particularly travel and dining out,” the report said. “It is growing businesses that have access to credit, while we found that these businesses have access to 1.8 types of credit on average. In comparison, SMEs with declining and stable revenues report access to 1.5 types of credit on average.”

However, these businesses are somewhat reluctant to use credit, with a PYMNTS Intelligence study showing that a third of SMEs are concerned about the cost of loans.

Nine out of ten SMEs used at least one type of borrowing tool through 2023, while nearly three-quarters turned to revolving credit products such as credit cards and lines of credit.