Corporate regulator sues PayPal over allegedly unfair contract with Australian small businesses

PayPal has been taken to court by Australia's corporate regulator, which claims the payment service's contracts with small businesses are unfair.

The Australian Securities and Investments Commission (ASIC) sued PayPal Australia in the Federal Court today over a clause that only gives businesses 60 days to dispute fees or charges with the payment service.

Under the PayPal clause, a business is considered to have accepted the fees as accurate once those 60 days have passed.

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ASIC has called that unfair, alleging it allows PayPal to keep fees it has overcharged or otherwise incorrectly applied if a business doesn't notify it within two months.

"ASIC has commenced this action to protect the interests of small businesses," the regulator's deputy chair Sarah Court said.

"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 has also claimed 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, and would cause detriment to PayPal business account holders if the term were relied on".

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It is seeking to have the term declared void and is also pursuing injunctions and corrective orders in the matter.

PayPal Australia said it was reviewing ASIC's claims

"We have been working in full cooperation with ASIC and take this matter very seriously," a spokesperson said.

"It would not be appropriate to comment in detail on proceedings before the court, however we are carefully reviewing the claims."

The lawsuit is the second major court action launched by ASIC this week, after it sued Westpac for allegedly failing to respond to 229 customers' hardship notices.

It's also ASIC's third unfair contract case this year, following similar action against Auto & General Insurance in April and HCF Life Insurance in May.