EU and UK law requires that the terms of consumer contracts have to be fair and drafted in plain and understandable language. Recently, the European Commission has investigated PayPal's terms, which Paypal has now agreed to modify.

The Consumer Protection Cooperation (CPC) is a network of authorities responsible for the enforcement of EU consumer protection laws. To tackle cross-border issues, their actions are coordinated at EU level. The CPC started a dialogue with PayPal in May 2023 because it considered the company's terms and conditions unreasonably difficult to understand and unfair for consumers under the Unfair Terms Directive (in the UK, this Directive is substantially implemented by the Consumer Rights Act 2015). PayPal has agreed to address the issues raised and will:

• clarify which clauses apply to consumers and which apply to businesses only;
• remove the provisions which require consumers to check the compliance with the law (for example, wording such as  “to the extent permitted by law”); 
• make it clear that consumers are not liable for damage not caused by their fault or that could not have been foreseen; 
• remove the provisions which impose on consumers the obligation to verify the information themselves (such as stating that PayPal cannot guarantee the accuracy of the information);
• ensure that consumers understand that they can benefit from the law of their country of residence if there is a dispute; and
• remove terms which cannot be understood by consumers without further explanations or without verification by consumers, such as “merchantability” or “non-infringement”.

The changes will be notified to users via a Policy Update on 21 February 2024 and will formally take effect on 28 May 2024.  The CPC will actively monitor how PayPal implements the commitments in its terms and conditions, and where necessary, enforce compliance.

The UK's CMA has taken similar action in high profile cases such as in the higher education sector.  The same issues would be problematical under the Consumer Rights Act.  Traders based in the UK should ensure that they review their terms to ensure that they comply with the Act, as well as the equivalent EU legislation if they trade with consumers in the EU.  

Financial services providers may also have the Financial Services Authority to answer to - for example, in October 2023, it published an undertaking given by Wirex Ltd under the Consumer Rights Act concerning terms in its e-money contract.