ASIC brings suit against Paypal Australia for alleged unfair contract term

Financial services watchdog asserts its commitment to protect small businesses

ASIC brings suit against Paypal Australia for alleged unfair contract term


By Jonalyn Cueto

The Australian Securities and Investments Commission (ASIC) has taken legal action against Paypal Australia Pty Limited, alleging that the company’s standard form of contracts with small business owners contains an unfair term.

According to ASIC, business account holders are given 60 days to notify Paypal of any errors or discrepancies in fees that Paypal has charged them, or else accept those fees as accurate. ASIC alleges such a term is considered unfair.

“ASIC has commenced this action to protect the interests of small businesses,” said Sarah Court, deputy chair of ASIC. “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.”

The financial services and consumer credit watchdog further alleges the contract term is unfair within the meaning of s12BG of the ASIC Act as the term:

  • causes a significant imbalance in the parties’ rights and obligations under the contract
  • is not reasonably necessary to protect PayPal’s legitimate interests
  • would cause detriment to PayPal business account holders if the term were relied on

The legal action follows two other proceedings issued by ASIC for unfair contract terms: one in April against Auto & General Insurance Company Limited and another in May against HCF Life Insurance Company Pty Limited.

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