PayPal Faces 2025 Lawsuit by Australian Regulator Over Unfair Small Business Contract Terms
The Australian Securities and Investments Commission (ASIC) has filed a lawsuit against PayPal, challenging a contract clause that allegedly imposes unfair conditions on small business users in Australia.
In 2024, Australia's financial watchdog, the Australian Securities and Investments Commission (ASIC), initiated legal action against PayPal (PYPL) over a contract term deemed unfair to small business account holders.
Key Highlights
- ASIC is suing PayPal for a contract clause that restricts small businesses from disputing fees after 60 days.
- According to PayPal Australia's standard business account agreement, users must report any billing discrepancies within 60 days, or the charges are considered final.
- ASIC argues this clause unfairly allows PayPal to keep fees that may have been wrongly charged, placing an undue burden on small businesses.
PayPal Australia's contract requires business users to notify the company within 60 days of any fee errors. Failure to do so results in automatic acceptance of the charges, which ASIC claims is an unfair practice that disadvantages small businesses, numbering over 600,000 as of mid-2023.
Legal documents submitted to the Federal Court of Australia highlight that this term creates an imbalance in rights, favoring PayPal over its business customers. ASIC is seeking a court injunction to invalidate the disputed contract clause.
A PayPal Australia spokesperson stated, "We are cooperating fully with ASIC and take these concerns seriously. While we cannot comment on ongoing court proceedings, we are thoroughly reviewing the claims."
Following the announcement, PayPal's shares dropped more than 2% in early trading on Thursday, contributing to an 18% decline year-to-date.
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