The Australian Securities and Investments Commission has taken PayPal to the Federal Court over a clause that lets the payment company keep customer fees they say wrongfully.
The offending clauses are regarding when payment fees are taken but when provider’s errors are not discovered within two months, PayPal keeps the fees of Australian corporations, but the ASIC says they are “unfair” under the ASIC Act.
With the new case, the ASIC intends to make the clause void due to the Act and the clause is currently found in 600,000 PayPal contracts.
Within the contract under “Your responsibility to notify PayPal of pricing or fee errors”, the clause says: “you [the customer] will have 60 days to notify PayPal in writing of any errors or discrepancies with respect to the pricing or other fees applied by PayPal”.
Additionally, the clause states: “If you do not notify PayPal within such timeframe, you accept such information as accurate, and PayPal shall have no obligation to make any corrections.”
According to the ASIC deputy chairman Sarah Court, she said the case had been lodged “to protect the interests of small businesses”.
She said that the clause is basically a loophole allowing PayPal to duck penalties of its own mistakes in overcharging small businesses, which also then places too pressure on these businesses to identify errors as well as notify PayPal.
According to a PayPal Australia spokesperson, they are working with the ASIC.
“It would not be appropriate to comment in detail on proceedings before the court; however, we are carefully reviewing the claims,” they said.
This is not the first time the ASIC has taken organisations to task regarding “fees for no service”.
After unreasonable contracts and excessive fees became a major focus for ASIC, major banks have also had to answer to the ASIC and PayPal operates as a bank in Australia under an APRA licence.
Westpac is another banking institution under fire and has seen its second Federal Court case initiated by ASIC this week due to the bank allegedly not getting back to customers over their request to launch hardship arrangements.
According to the Financial Review, “PayPal will escape civil penalties because amendments to laws to introduce them for breaches of the unfair contract term prohibitions do not come into force until November”.
Beyond Wespac and Paypal, the ASIC also sued Auto & General Insurance Company and HCF Life Insurance Company also siting unfair contract terms.