Australia's securities regulator is suing PayPal (PYPL) for a contract term that it says is unfair to small businesses.

In PayPal Australia's standard contract, there is a clause that gives its business account holders 60 days to notify of any errors or discrepancies in the fees, after which users will have to accept the charges as accurate.

The Australian Securities and Investments Commission (ASIC) alleged this term is unfair because it allows PayPal to retain fees that it wrongly charged if the disputed amount is not reported within 60 days. The ASIC considers the onus of reporting the error an unfair burden on small business account holders, which numbered about 608,275 as of June 30.

In documents filed with the Federal Court of Australia, the ASIC argued that allowing PayPal to retain fees that were erroneously credited creates an imbalance in the rights and obligations of PayPal and its business customers.🐓 ASIC is seeking an injunction to declare the term in the contract void.

"We have been working in full cooperation with ASIC and take this matter very seriously. It would not be appropriate to comment in detail on proceedings before the court, however, we are carefully reviewing the claims," a PayPal Australia spokesperson told Reuters.

Shares of PayPal dipped more than 2% in early trading on Thursday following the news. With Thursday morning's dip, shares of PayPal were down about 18% year-to-date.