Oct 22, 2004  |  By: LOU CHIBBARO JR.  | COMMENTS     

When PayPal, the giant Internet payment processing service, announced last year it would no longer do business with clients that sell pornographic products or services, gay-owned Internet businesses assumed the firm was aiming its new policy at the graphic sex trade.

But at least three gay-owned companies that conduct business over the Internet say PayPal appears to be using its anti-porn policy against them, even though they don’t consider their businesses to be sexually oriented.

The Los Angeles based H.I.M. Corp., which operates a network of Web sites that provide services to gay audiences, and the New York City-based Belhue Press, which publishes books by gay authors, said PayPal dropped them as clients earlier this year.

The Red Hot Organization, an international group that raises funds for AIDS causes by selling music recordings and music related promotional items on the Internet, says PayPal dropped them from its service, apparently because of objections over its safer-sex messages.

“Red Hot has never considered its content obscene or adult,” said Jeff Jackson, the organization’s production manager. “We do discus safe sex and safe needles as it relates to the AIDS epidemic on our Web site,” he said.

Jackson said he raised objections to PalPal’s action, saying his organization’s aim is to educate the public on ways to avoid AIDS. He said PayPal never responded to his concerns. His group has since switched to another bill payment servicing company, he said.

But the amount of donations to the group has dropped because the replacement company, Groundspring, is less well-known than PayPal, Jackson said.

Officials with the three firms said PayPal informed them via e-mail notification that their Web sites violated PayPal’s recently adopted “acceptable use” policy.

News of H.I.M. Corp. and Belhue Press’s problems with PayPal surfaced around the same time as reports that PayPal had abruptly ended its services to BadPuppy.com, a sexually oriented Web site that caters to gay men. Officials with BadPuppy.com did not return calls by press time. Sources familiar with the company have said its cutoff from PayPal has caused it to suffer financial hardship.

Neither PayPal nor its parent company eBay returned repeated calls seeking comment on PayPal’s policy on sexually oriented business and whether the policy applies to non-sexually oriented gay businesses.

Spokespersons for Visa International and MasterCard, the two largest U.S. credit card service firms, said the two firms don’t have policies restricting payments to sexually oriented businesses as long as those businesses don’t violate any laws.

PayPal, which was acquired in 2002 by the multi-billion dollar online auction company eBay, acts as a payment service that allows online purchasers to pay for products or services directly from their bank accounts as well as from their credit cards.

Many customers view the service as a protection against online fraud because they don’t have to reveal credit card information directly to the online companies from which they buy merchandise or services. PayPal acts as a safer intermediary, business analysts have said.

More than 40 million consumers currently use PayPal, many of whom purchase merchandise through eBay, according to the business publication Hoover Online.

Companies that sell merchandise or services online must seek approval from PayPal to become associated with the payment services firm.

An objection to one book cover
Perry Brass, the Belhue Press owner, said he tried unsuccessfully to reach someone at PayPal by phone to find out why the firm dropped his company as a customer. After a flurry of e-mail exchanges with the company’s customer service department, Brass said, PayPal informed him it stopped doing business with him because it objected to a photo on the cover of one of the books he published.

According to Brass, the photo showed two bare-chested men embracing one another, with no genital area or “private parts” visible.

“It’s no different from the book covers on dozens of straight romance novels that you see on sale in airports or in any bookstore,” Brass said.

In response to his follow-up e-mails saying the books he publishes aren’t pornographic, PayPal sent him a reply saying the company would consider reinstating his account if he submits a statement promising to “remove the book covers wherein individuals are touching each other.”

Brass said he refused to agree to such a request and has sought out an alternative ...