PayPal makes money from unfair contract terms in Australia?

Australia’s federal court has said that PayPal has included an unfair term in its standard contracts with small business customers, according to a statement from the Australian Securities & Investments Commission (ASIC) on Friday.

PayPal money transfer

The term required SMB customers in Australia to accept overcharging errors as accurate if they did not report them to PayPal within 60 days.

The court deemed the term unfair, noting that it penalized small business customers for failing to detect and report billing errors in a timely manner. This ruling follows ASIC’s court proceedings against PayPal, initiated last September, Reuters news report said.

PayPal Holdings revenue for the twelve months ending March 31, 2024 was $30.430B, a 8.39 percent increase year-over-year. PayPal does not share its revenue in Australia.

The declarations affect small businesses who 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, the leading digital payment company, has agreed that the term was unfair and consented to the declarations, having voluntarily removed the term from its contracts on 8 November 2023. PayPal is not facing any penalty. PayPal will pay litigation fee.

ASIC Deputy Chair Sarah Court emphasized the broader implications of the ruling: “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.”

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