ASIC to take PayPal to court for unreasonable term in SME contracts: Report

The regulator sees it unfair for PayPal to put a penalty over its own overcharging errors.

Australian Securities and Investments Commission (ASIC) plans to sue PayPal's local branch, accusing it of including an unfair term in its contracts with small business customers, Reuters reported.

The ASIC has initiated legal proceedings against PayPal Australia, focusing on a contract term that grants PayPal business account holders a 60-day window to report fee discrepancies.

READ MORE: Australian regulator sues PayPal unit over unfair term in small business contracts

A spokesperson from PayPal Australia stated, "We have been cooperating fully with ASIC and take this matter seriously. We are currently reviewing the claims and cannot comment in detail on ongoing legal proceedings,"

According to ASIC, if customers fail to report errors in their account statements within the specified period, they are compelled to accept the fees as accurate. ASIC considers this term unfair as it enables PayPal to retain fees that it has inaccurately charged.

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ASIC Deputy Chair Sarah Court expressed, "We allege this term is unfair because it allows PayPal to avoid consequences for its own overcharging errors and places an additional burden on small businesses to identify and rectify charging mistakes."

As of June 30, there were approximately 608,275 business account contracts between PayPal and active users in Australia.