• The President of the Office of Competition and Consumer Protection, Tomasz Chróstny, initiated proceedings against PayPal.
• The Company might be in use of prohibited contract terms in standard contracts used in relations with consumers, and this is punishable by a fine of up to 10% of turnover.
• What raises doubts are, for instance, unclear issues regarding the freedom to impose contractual penalties, such as blocking access to accounts, monetary sanctions, or terminating contracts.

PayPal (Europe) renders it possible to make online payments worldwide, and it is a type of electronic wallet integrated with a bank account to which a payment card can be assigned. The President of the Office of Competition and Consumer Protection, Tomasz Chróstny, found that the Luxembourg company may use prohibited contract terms. The charges concern three provisions of the “PayPal User Contract”: a list of prohibited actions, a list of sanctions, and a ban on using an account when it is either blocked or suspended. The President of the Office believes that the content contained in the said document may be contrary to best practices and lead to a gross disproportion of rights and obligations between the consumer and the entrepreneur.

The findings of the Office show that the prohibited actions have been described imprecisely, they lack specific examples or clarification of unclear and complex terms, thus leaving interpretation in this respect only to the entrepreneur. The reservations relate, inter alia to the formal and grammatical structure of the provisions. The user, having read the contract, is not able to determine which of their actions may be considered prohibited by PayPal, or what sanctions the Company may impose.

According to one of the provisions contested by the Office of Competition and Consumer Protection, when PayPal finds that the consumer has committed any of the prohibited actions, it may “at any time and at its discretion take a number of actions to protect the Company (...)”. The catalogue of sanctions contained in the contract is open – it means that the Company may also apply penalties not provided for therein. Nor do the provisions of the contract hold PayPal obligated to indicate a specific infringement or provide a justification for the applied sanction.  It is possible, therefore, to block funds “in the amount and for as long as necessary”, to impose an obligation on the consumer to pay the equivalent of USD 2,500 or more, or even to close the user's account without notice and refuse to provide services in the future.

The provisions concerning what happens when a PayPal account is actually suspended or closed also remain unclear. The contract indicates that even an attempt to use such an account may be penalised. At the same time, the provision lacks an explanation of whether this applies to login attempts or other types of actions, or what penalties are provided for doing so. Neither was it specified whether the Company intends to continue to charge fees for using the account if its balance is positive.

“Contracts, and especially those parts of them that define the negative consequences of prohibited actions, must be phrased in a simple and understandable, but at the same time precise language and be based on clearly defined criteria. Consumers should be able to anticipate the consequences of their actions while feeling assurance regarding the safety and ability to use their financial resources. Accordingly, it is inadmissible for the Company to indemnify itself from any liability while freely imposing such severe sanctions as, for example, blocking funds or closing the account”, says Tomasz Chróstny, President of the Office of Competition and Consumer Protection.

The preliminary investigation procedure concerning PayPal began in December 2021. Now the Company has heard charges of using prohibited contract terms in standard contracts used in relations with consumers, and this is punishable by a fine of up to 10% of turnover.

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