PayPal Australia is facing legal proceedings lodged by the Australian Securities & Investment Commission (Asic) after discovering an unfair term in the company’s contracts with small businesses.

The term appears in PayPal’s User Agreement, one of several documents that form its contract with Australian business account holders.

Under this term, business account holders have 60 days to notify PayPal of any errors or discrepancies in fees that it has charged them, or else accept those fees as accurate.

The term allows PayPal to retain fees it has overcharged or wrongly charged if small businesses do not notify within the 60-day period, which Asic argues is not fair.

Asic deputy chair Sarah Court says the term allows PayPal to “escape the consequences of its own errors” and places additional burdens on small businesses.

The term also causes a significant imbalance in the parties’ rights and obligations and is not reasonably necessary to protect PayPal’s legitimate interests, Asic alleges. 

The commission is seeking declarations that the term is void, as well as injunctions and corrective orders.