PayPal to Levy Fines for Gambling, Porn

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PayPal to Levy Fines for Gambling, Porn

By Lisa Baertlein

SAN FRANCISCO (Reuters) - PayPal, the online payments arm of eBay Inc.
(Nasdaq:EBAY - news), on Friday said it will soon fine people up to
$500 for uses related to gambling, adult content or services, and
buying or selling prescription drugs from noncertified sellers.


The new policy, which takes effect Sept. 24 and applies to both buyers
and sellers, marks the first time PayPal has imposed fines for
violations of its use policy, spokeswoman Amanda Pires said.


In addition to fines that could be applied to each violation, PayPal
may take legal action to recover losses in excess of the fines, Pires
said in an interview.


PayPal processes transactions on the Net and at one time had received
almost 10 percent of its revenue from online gambling. But it halted
the practice under regulatory pressure after its acquisition by eBay
in 2002 and now prohibits the processing of gambling and adult
transactions. Now it has decided to enforce that policy with fines.


"What you're seeing here is an evolution of our program. We're trying
to deter people who would offer PayPal as a way to pay for anything in
these categories," said Pires in an interview.


Under the new policy, prescription drug sellers who do not have
Verified Internet Pharmacy Practice Sites certification from the
National Association of Boards of Pharmacy, and the people who buy
from them, also face fines and possible legal action if they do
business using PayPal.


Pires said the changes were not in response to any sort of pressure
from regulators.


Eric Jackson, a former PayPal executive and author of the new book
"The PayPal Wars," had a different view.


He called the new policy "draconian" and said it was likely a two-fold
strategy to discourage certain behavior while heading off regulators.


"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," Jackson said.


"I think they're making an emphatic statement that they're making a
clean break from gambling in particular," he said.