ASIC has announced that the Federal Court has declared a term used by PayPal Australia Pty Limited (PayPal) in its standard form contracts with small businesses which allow PayPal to retain fees that it had erroneously charged to be unfair.

UPDATE: Now reported at Australian Securities and Investments Commission v PayPal Australia Pty Limited [2024] FCA 762.

The Court found that the term was unfair because its effect was to allow PayPal to retain fees that it had erroneously charged if the small business failed to notify PayPal of the error within 60 days of the fee appearing on its account statement.

The Court declared the unfair term void from the start of the contracts and ordered that PayPal be restrained from applying, relying on, or enforcing, the term in its contracts with small businesses.

The declarations affect small businesses that opened a PayPal Business Account between 21 September 2021 to 7 November 2023. As of 30 June 2023, there were over 600,000 small businesses with PayPal Business Accounts. PayPal agreed that the term was unfair and consented to the declarations, having voluntarily removed the term from its contracts on 8 November 2023.

Justice Moshinsky delivered oral reasons. The Court is yet to publish its written reasons.

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