Criticism

In 2003, PayPal voluntarily ceased serving as a payment intermediary between gambling websites and their online customers. At the time of this cessation, it was the largest payment processor for online gambling transactions. In 2010, PayPal resumed accepting such transactions, but only in those countries where online gambling is legal, and only for sites which are properly licensed to operate in said jurisdictions.

If an account is subject to fraud or unauthorized use, PayPal puts the "Limited Access" designation on the account. PayPal has had several notable cases in which the company has frozen the account of users such as Richard Kyanka, owner of the website Something Awful, in September 2005, Cryptome in March 2010, or April Winchell, the owner of Regretsy, in December 2011. The account was reinstated, and PayPal apologized and donated to her cause.

In September 2010, PayPal froze the account of a Minecraft developer, Markus Persson. Persson stated publicly that he had not received a clear explanation of why the account was frozen, and that PayPal was threatening to keep the money if they found anything wrong. His account contained around €600,000.

PayPal's partner MasterCard ceased taking donations to WikiLeaks in 2010, and PayPal also suspended, and later permanently restricted, payments to the website after the U.S. State Department deemed WikiLeaks activities as illegal. Online supporters and activists retaliated by subjecting PayPal and MasterCard, along with other companies, to coordinated cyber attacks.

In February 2011 PayPal unbanned the account of a website that supports Iraq War resisters after it had enough information to fulfill its know your customer guidelines. The Chelsea Manning Support Network claimed the backdown was a reaction to a petition to the company to reinstate the account.

In May 2013, PayPal declined to pay a reward offered in its Bug Bounty Program to a 17-year-old German student who had reported a cross-site scripting flaw on its site. The company wrote that the vulnerability had been previously reported, and chastised the youth for disclosing the issue to the public, but, uniquely, sent him a "Letter of recognition" for the discovery.

In August 2013, entrepreneurs who had used PayPal to collect the funds they raised on crowdfunding platforms like Kickstarter and Indiegogo reported difficulty in being able to withdraw the money. Most notable victims are Ouya, GlassUp (a rival to Google Glass), and Mailpile.

In May 2014 PayPal blocked the account of a Russian human rights organisation "RosUznik", which supported political prisoners arrested at Bolotnaya Square case.

As of January 2015, a class-action lawsuit against PayPal has been filed in Israel, claiming that they arbitrarily freeze accounts and hold funds for up to 180 days without paying interest and thereby directly profit from it. The lawsuit requests that PayPal be declared a monopoly and thus regulated accordingly.

In April 2015 The Guardian reported PayPal blocking the account of London-based human rights group Justice for Iran.

In May 2015 PayPal blocked an account intended to raise money for the distribution of Boris Nemtsov's report "Putin. War". The explanation by PayPal was that "PayPal does not offer the opportunity to use its system for collecting funds to finance the activities of political parties or for political aims in Russia", though PayPal's Acceptable Use Policy does not mention financing for political goals. Non-governmental organization Freedom House issued a statement that "PayPal should immediately lift this ban, to help, rather than hinder, press freedom in Russia."

By 2016, ConsumerAffairs had received over 1,200 consumer complaints relating to PayPal policies.failed verification Consumers have also launched numerous anti-PayPal Facebook sites and Twitter accounts to air their complaints.

In February 2017, PayPal froze the account of News Media Canada, a Canadian trade association, in response to a payment from The Reminder, a Flin Flon, Manitoba community newspaper, intended to cover the fee for the Reminder's submission of articles for consideration in a nationwide journalism contest run by News Media Canada, including one discussing Syrian refugees. PayPal cited United States regulations as a reason for flagging the transaction between Canadian entities.

In September 2018, PayPal banned radio host Alex Jones and his website InfoWars, claiming that his site has content that was hateful and discriminatory against certain religious groups.

PayPal discontinued payments to Pornhub models on November 14, 2019, alleging that "Pornhub has made certain business payments through PayPal without seeking our permission". Pornhub criticized the decision as one that affected "over a hundred thousand performers who rely on them for their livelihoods", and steered its payees toward other payment options.

In September 2020, PayPal issued new terms of service which introduce a fee for inactive account in 19 countries. PayPal sent its clients an e-mail about updating the terms, but didn't mention introducing such fee. In reaction, some users closed their accounts once they found it from news and social media.