Australia's securities regulator said on Thursday it will take PayPal's local arm to court alleging that the digital payments giant's standard contracts with small business customers contain an unfair term that could overlook errors in overcharging, burdening its clientele.

The Australian Securities and Investments Commission (ASIC) said it has started proceedings against PayPal Australia Pty Ltd in a case that highlights a contract term that gives PayPal business account holders 60 days to notify discrepancies in fees charged.

In a situation where customers fail to bring the errors appearing in its account statement within the stipulated period to the company's notice, they are forced to accept the fees as accurate, the regulator alleged.

The regulator views the term as unfair as it authorises PayPal to retain fees it has inaccurately charged.

"We allege this term is unfair because it allows PayPal to escape the consequences of its own errors in overcharging small businesses, and places additional burdens on small businesses to detect and correct charging errors," ASIC Deputy Chair Sarah Court said.

PayPal Australia did not immediately respond to a Reuters request for comment.

As at June 30, there were about 608,275 business account contracts between PayPal and active users in the country.

(Reporting by Roushni Nair in Bengaluru; Editing by Shailesh Kuber)