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PayPal to Fine Gambling, Porn Sites

PayPal, the eBay-owned online payment provider, plans to levy fines of up to $500 for users who violate its acceptable use policy regarding adult content and services, prescription drugs and gambling.

Effective September 24, PayPal's compliance team will strictly enforce the new acceptable use policy to implement the monetary fines on Web site owners who use PayPal to collect payment for illegal services.

PayPal also warned that it "may take legal action to recover losses in excess of the fines."

PayPal spokesperson Amanda Pires told internetnews.com the move is part of the company's mission to stamp out online fraud and scams targeting PayPal users.

"There is a business risk associated with those categories, and we are moving to protecting our users," Pires said.

Previously, users who violated the company's acceptable use policy ran the risk of having the accounts limited or closed. PayPal is hoping that the threat of a monetary fine will serve as a deterrent to sellers involved in those three categories.

According to the policy posted online, the Mature Audiences category describes any material or services suggesting sexual activity or any material or services designed to sexually arouse the viewer or reader.

Non-adult services whose Web site marketing can be reasonably misconstrued as allowing adult material or services to be purchased using PayPal are also banned from using PayPal.

Prior to its October 2002 acquisition by eBay, PayPal collected about 10 percent of its revenues from adult and gambling sites, but this was discontinued in 2003.

PayPal's exit from the porn market segment followed pressure on eBay to shut down the gaming business under the Patriot Act.

"The regulatory environment for the gaming business is just too challenging...And the adult market has extremely high rates of fraud," eBay spokesman Chris Donlay said at the time.