5 July 2024 - Court declares PayPal Australia used an unfair contract term

The Federal Court has declared a term used by PayPal Australia Pty Limited (PayPal) in its standard form contracts with small businesses to be unfair.

The Court found that the term was unfair because its effect was to allow PayPal to retain fees that it had erroneously charged if the small business failed to notify PayPal of the error within 60 days of the fee appearing on its account statement.
The declarations affect small businesses who opened a PayPal Business Account between 21 September 2021 to 7 November 2023. As of 30 June 2023, there were over 600,000 small businesses with PayPal Business Accounts. PayPal agreed that the term was unfair and consented to the declarations, having voluntarily removed the term from its contracts on 8 November 2023.

Deputy Chair Sarah Court said, ‘ASIC is dedicated to protecting consumers and small businesses from unfair contract terms and ensuring that all financial services providers use fair contract terms.’ 

‘Today’s decision serves as a reminder to all businesses that unfair contract terms contained within standard form contracts with small businesses will not be tolerated, and that ASIC will take decisive action where appropriate to protect the rights of consumers and small businesses.’