Online payment processor PayPal plans to fine people up to $500 for using the service for Internet porn, e-gambling, and buying or selling prescription drugs from non-certified sellers. And the company might also take legal action in such cases to recover losses in excess of the fines, according to spokeswoman Amanda Pires.
Regulatory pressure prompted PayPal – which was bought by online auction kings eBay in 2002 – to quit processing e-gambling payments in spite of getting almost ten percent of its revenues from gambling in cyberspace.
"What you're seeing here is an evolution of our program," Pires said of the coming fines in a wire service interview. "We're trying to deter people who would offer PayPal as a way to pay for anything in these categories." And she added that the coming fines policy was PayPal's own idea and wasn't inspired by further regulatory pressure.
The new PayPal policy, effective September 24, will also levy fines and potential legal action against online drug sellers lacking certification as Verified Internet Pharmacy Practice Sites from the National Association of Boards of Pharmacy.
Evan Horowitz, of adult Internet performance commerce network Xpays.com, told AVNOnline.com he wasn't surprised by PayPal's move.
"I think if you're eBay, and you have a long future ahead of you, it's important to protect yourself from legal liabilities," he said. "And those who don't abide by their terms and conditions shouldn't use PayPal. There's plenty of alternatives out there. With the way the lawsuits are flying around from everybody to everybody, if you don't cover your ass you have a lot to lose, and I'm sure PayPal has lots of lawyers."
A former PayPal executive, Eric Jackson, doesn't exactly applaud his former company's new policy, calling it draconian and saying it might be a two-tack policy aimed at discouraging certain behaviors while keeping the regulatory hellhounds off PayPal's trail.
"I can only surmise that PayPal is coming under increasing regulatory pressure and has no choice at this point but to take an aggressive posture,"said the author of the forthcoming The PayPal Wars. "I think they're making an emphatic statement that they're making a clean break from gambling in particular."
Horowitz said the online gambling and drug buying transactions are a kind of gray area for PayPal. "Even though [PayPal is not] the ones selling stuff that isn't allowed, they're still based in the U.S., and they collect transaction fees, and for them to be complicit or have any commercial gain from stuff that isn't allowed is bad for them and bad for eBay. If I owned PayPal, I would do the same thing."
