Australia: Issued Federal Court ruling in ASIC public lawsuit against PayPal for using an unfair contract term with small businesses

On 5 July 2024, the Australian Securities and Investments Commission (ASIC) announced that the Federal Court of Australia issued a ruling, declaring a term used by PayPal Australia in its standard form contracts with small businesses to be unfair. The term allowed PayPal to retain erroneously charged fees if the small business did not notify PayPal of the error within 60 days. This affected businesses that opened a PayPal Business Account between 21 September 2021 and 7 November 2023. PayPal, which had already removed the term on 8 November 2023, agreed to the declarations. The Court declared the term void from the contract's start and restrained PayPal from enforcing it. The court found that small businesses were not in a position to manage the risk of incorrect or overcharging as PayPal was. The 60-day notification period was also deemed unfair because account statements did not clearly describe fees in a way that was reconcilable with the Product Disclosure Statement (PDS). However, there was no evidence that PayPal caused any loss or damage by relying on the unfair term. Finally, the Court also ordered PayPal to pay ASIC's litigation costs.