Court Ruling: PayPal Australia Unfair to Small Merchants

Australia’s federal court has ruled that a term in PayPal’s contract for local small businesses is unfair.

The reason, the court ruled Friday (July 5) is because the contract terms allowed PayPal to retain fees it had erroneously charged if the small business failed to inform PayPal of the error within 60 days of the fee showing up on its account statement.

“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,” Sara Court, deputy chair of the Australian Securities and Investments Commission (ASIC), said in a news release.

“PayPal Australia takes our responsibility to our customers very seriously and we have been working in full cooperation with ASIC on this matter,” a company spokesperson said in a statement provided to PYMNTS. “PayPal Australia is not aware of any instances, and ASIC did not find any instances of business accounts experiencing loss due to reliance on the contract term, which was removed from our contracts last year.”

ASIC said it too was unable to find any examples of businesses suffering losses because of the contract term.

According to ASIC, the court declared the unfair term void and barred PayPal from applying, relying on or enforcing it in its small business contracts. The ruling affects small businesses which opened a PayPal account between September 21 of 2021 and November 7, 2023, when PayPal removed the term from its contracts.

In other small business news, PYMNTS wrote recently that American small- to medium-sized businesses (SMBs) are seeing growth that exceeds that of the GDP, something that hasn’t happened for two years.

“The growth in the hospitality segment — where revenues were up 10% in 2023 versus 1.5% in 2022 — gives a sense of where consumers have shifted their spending, namely to experiences, especially travel and dining out,” that report said. “It’s the firms that are growing that have access to credit, where we found that those companies have access to 1.8 types of credit, on average. In comparison, SMBs with decreasing and stable revenue report access to 1.5 types of credit on average.”

However, these companies are somewhat uneasy about tapping credit, with PYMNTS Intelligence research showing that a third of SMBs were concerned about loan costs.

Nine in 10 SMBs relied on at least one type of borrowing tool through 2023, while nearly three quarters turned to revolving credit products like credit cards and lines of credit.