Australian court rules PayPal's local unit used unfair contract term for small businesses

(Reuters) -Australia's federal court has found that PayPal's local unit used an unfair term in its standard contracts with small business customers who overlooked errors in overcharging, the country's securities regulator said on Friday.

The court found the term was unfair because customers who did not bring the overcharging errors to PayPal's notice within 60 days were forced to accept the fees as accurate, the Australian Securities & Investments Commission (ASIC) said.

The ASIC had initiated court proceedings against PayPal over this issue last September.

"Today's decision serves as a reminder to all businesses that unfair contract terms contained within standard form contracts with small businesses will not be tolerated, and that ASIC will take decisive action where appropriate to protect the rights of consumers and small businesses," ASIC Deputy Chair Sarah Court said.

ASIC said that PayPal voluntarily assisted it during its investigation.

PayPal agreed that the term was unfair, consented to the declarations, and voluntarily removed the term from its contracts on Nov. 8, 2023, according to the regulator.

"PayPal Australia takes our responsibility to our customers very seriously and we have been working in full cooperation with ASIC on this matter," a spokesperson for the company said.

The court also ordered PayPal to pay the ASIC's litigation costs.

(Reporting by Himanshi Akhand in Bengaluru; Editing by Mrigank Dhaniwala and Sonia Cheema)