Australian Court Finds PayPal Used Unfair Terms in Small Business Contracts

The Federal Court of Australia has ruled that a term used by PayPal Australia Pty Limited in its standard form contracts with small businesses is unfair. This term allowed PayPal to retain fees it erroneously charged if the small business did not notify PayPal within 60 days of the error. The ruling affects over 600,000 small businesses that opened a PayPal Business Account between September 21, 2021, and November 7, 2023.

The court found that small businesses were not adequately positioned to manage the risk of incorrect or overcharging under this term. As a result, the term has been declared void from the start of the contracts, and PayPal has been ordered not to apply, rely on, or enforce it in any future contracts with small businesses. PayPal agreed to the declarations and removed the term from its contracts on November 8, 2023. Additionally, the court has ordered PayPal to pay the Australian Securities and Investments Commission's (ASIC) litigation costs.