ayPal, eBay's online payment service subsidiary, will stop handling payments for "adult" merchandise - anything from sex toys to magazines to DVDs - beginning June 12, 2003. The company already had stopped processing payments for downloads of pornographic material such as digital photos, streaming video and Web site subscriptions as of May 12.

PayPal said massive fraud is the driver for its change in policy - there is too much of it when dealing with adult-oriented purchases.

Like several other payment companies, PayPal has been cracking down on facilitating payments for "adult" goods. In November 2002, Visa classified any online seller of digital images as a high-risk merchant, which means that these types of merchants must register directly with Visa instead of using third parties for billing. The association even requires some adult merchants to pay a $500 initial registration fee and $50 each year.

PayPal's competitor, Yahoo! PayDirect, also does not accept payments for adult content.

eBay said it still will list items in its "mature audiences" category, but buyers of this merchandise will have to send a check or money order or use a credit card instead of using PayPal's payment service although some online merchants may not accept these directly.

A spokesperson for eBay said the company's decision includes items both "on and off" eBay. About half of PayPal's transactions are for payments beyond eBay.

PayPal will continue to handle payments for condoms, risqu€ (but not pornographic) works of art, and magazines with publication dates before 1980, which are considered collector's items.

In addition to adult themed merchandise, PayPal also does not accept payments for tobacco, lottery tickets, used air bags and human corpses; it also does not take payments for online casinos. Because of the uncertain legal implications, eBay ended PayPal's policy of accepting payments for online gambling when it acquired the company in October 2002.