PayPal Hit with Landmark Decision for Unfair Contracts with Small Businesses

In a landmark decision, Australia’s federal court has ruled that PayPal’s local unit used an unfair term in its standard contracts with small business customers who failed to report errors in overcharging, according to the Australian Securities & Investments Commission (ASIC). The court found that customers who did not point out overcharging errors to PayPal within 60 days were required to accept the fees as accurate. ASIC took legal action against PayPal over this issue in September.

The court also emphasized that businesses must not include unfair contract terms in standard form contracts with small businesses. Sarah Court, Deputy Chair of ASIC, stated that ASIC will take action to protect the rights of consumers and small businesses. PayPal cooperated with ASIC during the investigation and agreed that the term was unfair. They consented to the declarations and removed the term from their contracts voluntarily on November 8, 2023.

The ruling by the federal court serves as a warning to all businesses about including unfair terms in contracts with small businesses. The ASIC is committed to taking decisive action to uphold consumer and small business rights in similar cases. This decision will help ensure that small business owners have fair contracts with their payment processors, giving them greater confidence and control over their financial operations.