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ASIC sues PayPal Australia for alleged unfair contract term with small businesses

ASIC has commenced proceedings against PayPal Australia Pty Limited (PayPal) alleging that its standard form contracts with small business customers contain an unfair contract term.

The case involves a contract term that gives PayPal business account holders 60 days to notify PayPal of any errors or discrepancies in fees that PayPal has charged them, or else accept those fees as accurate.

ASIC alleges the term is unfair because the effect of the term is to permit PayPal to retain fees it has overcharged or wrongly charged if the small business does not notify PayPal of the error within 60 days of the fee appearing in its account statement.

ASIC Deputy Chair Sarah Court said, ‘ASIC has commenced this action to protect the interests of small businesses. We allege this term is unfair because it allows PayPal to escape the consequences of its own errors in overcharging small businesses, and places additional burdens on small businesses to detect and correct charging errors.’

ASIC further alleges the contract term is unfair within the meaning of s12BG of the ASIC Act as the term:

  • causes a significant imbalance in the parties’ rights and obligations under the contract
  • is not reasonably necessary to protect PayPal’s legitimate interests, and
  • would cause detriment to PayPal business account holders if the term were relied on.
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ASIC is seeking declarations that the term is void. ASIC is also seeking injunctions and corrective orders.

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