The Federal Court has declared unfair a term used by PayPal Australia Pty Limited in its standard form of contract with small businesses.
The Court found that the term was unfair because it allowed PayPal to keep the fees it had charged in error if the small business did not notify PayPal of the error within 60 days of the charge appearing on its statement.
The statements affect small businesses that opened a PayPal business account between September 21, 2021 and November 7, 2023. As of June 30, 2023, there were over 600,000 small businesses with PayPal business accounts. PayPal agreed that the term was unfair and agreed to the statements, having voluntarily removed the term from its contracts on November 8, 2023.
The Court declared the clause void from the outset of the contracts and enjoined PayPal from applying, relying on or enforcing the term in its contracts with small businesses.
Shortly after the hearing on July 4, 2024, Judge Mosinski delivered oral arguments. Honor found that, unlike PayPal, small businesses were unable to manage the risk of being incorrectly charged or overcharged.
His Honor also found that each small business had only 60 days to notify PayPal in writing of any erroneous deduction of fees or charges in cases where the account statements did not describe the different types of fees or how they were calculated. a way that was easily reconciled with the way these fees were described in the PDS.
His Honor also found that PayPal was not aware of any instance where it had caused loss or damage to a consumer by relying on the Billing Error Term, and ASIC’s investigation did not reveal any instance where PayPal had done so.
The Court also ordered PayPal to pay ASIC’s costs.
PayPal cooperated and voluntarily assisted ASIC during its investigation and also cooperated in the resolution of this proceeding.
On 6 September 2023, the Australian Securities and Investments Commission (ASIC) commenced proceedings against PayPal in the Federal Court, alleging that its standard contracts with small business customers contained an unfair contract term. The term appeared in PayPal’s Integrated Financial Services Guide and its Product Disclosure Statement and User Agreement, one of several documents that make up the contract between PayPal and its Australian business account holders.