The Federal Court has declared a term in PayPal Australia’s standard contracts with small businesses to be unfair. The term allowed PayPal to retain any amount it overcharged a customer unless the customer notified PayPal of the overcharge within 60 days of the error appearing on the customer’s account statement.

📌 The term created a significant imbalance because:

➡️ PayPal could keep fees it overcharged due to its own errors.
➡️ It restricted small businesses’ ability to correct or seek compensation for PayPal’s mistakes.
➡️ PayPal had an advantage in identifying overcharges, as these were not easily visible on account statements and the fee calculation method was unclear.
➡️ Small businesses had no equivalent right to benefit from PayPal’s undercharging or to offset such benefits.

📌 Key details:

➡️ Affected Businesses: Small businesses with PayPal Business Accounts from 21 September 2021 to 7 November 2023.
➡️ Court Decision: The unfair term has been declared void from the start of the contracts. PayPal is barred from applying, relying on, or enforcing this term.
➡️ PayPal’s Response: PayPal agreed the term was unfair and removed it from contracts as of 8 November 2023. They have cooperated with ASIC and will cover ASIC’s litigation costs.

Justice Moshinsky highlighted the imbalance, noting small businesses had insufficient means to manage incorrect charges. The decision emphasises ASIC’s commitment to fair contract terms and consumer protection.

🔗 Stay Tuned: The Court’s written reasons will be published soon.

🔍 Reminder: This case underscores the need for fairness in financial service contracts. All businesses should ensure their terms comply with legal standards to avoid similar issues.