The Australian Securities and Investments Commission (ASIC) has filed a lawsuit against PayPal Australia Pty Limited (PayPal). ASIC alleges that PayPal's standard contracts with small business clients contain unfair terms.
The allegations relate to a contract term that gives PayPal account holders 60 days to notify PayPal of any errors or inaccuracies in the calculation of fees charged by PayPal. Failure to do so will result in them being deemed correct.
ASIC said such terms were unfair because they legitimized PayPal's retention of excessive fees if they were not reported in a timely manner, i.e., within 60 days of an account statement being
generated with an incorrect fee.
Sarah Court, Deputy Chair of ASIC, 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 states the contract terms are inconsistent with the meaning of Section 12BG of the ASIC Act, cause a significant imbalance in the parties' rights and obligations under the contract, and are not reasonably necessary to protect PayPal's legitimate interests.
In addition, such requirements are detrimental to PayPal's business account holders, the regulator said.
ASIC intends to seek judicial relief to overturn the imposition of a requirement to verify the accuracy of fees. ASIC will also seek injunctions and remedial orders.
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