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

FILE PHOTO: The PayPal logo is seen at an office building in Berlin

(Reuters) – Australia’s securities regulator said on Thursday it will take PayPal’s local arm to court alleging that the digital payments giant’s standard contracts with small business customers contain an unfair term that could overlook errors in overcharging, burdening its clientele.

The Australian Securities and Investments Commission (ASIC) said it has started proceedings against PayPal Australia Pty Ltd in a case that highlights a contract term that gives PayPal business account holders 60 days to notify discrepancies in fees charged.

“We have been working in full cooperation with ASIC and take this matter very seriously. It would not be appropriate to comment in detail on proceedings before the court, however, we are carefully reviewing the claims,” a PayPal Australia spokesperson told Reuters.

The regulator alleged that in a situation where customers fail to bring the errors appearing in its account statement to the company’s notice within the stipulated period, they are forced to accept the fees as accurate.

The regulator views the term as unfair as it authorises PayPal to retain fees it has inaccurately charged.

“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 Deputy Chair Sarah Court said.

As at June 30, there were about 608,275 business account contracts between PayPal and active users in the country.

(Reporting by Roushni Nair in Bengaluru, additional reporting by Poonam Behura, Editing by Shailesh Kuber)