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PayPal meltdown wreaks havoc on some ecommerce websites

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A glitch in PayPal's payment verification system is wreaking havoc on some ecommerce sites that depend on the service. For more than 48 hours, the bug in PayPal's instant payment notification has made it impossible for them to process orders, owners of these businesses complain.

Making matters worse, the glitch causes credit card holders who place orders to be billed even though they are unable to take delivery of the goods or services they've just purchased. PayPal customers began reporting the difficulty on Thursday morning and at time of publication - more than two days later - PayPal owner eBay was still struggling to fix the problem.

"We can't accept payments done with PayPal which is a really large share of our payments since most of our customers are from America and PayPal is almost a de facto standard or means for online payment there," Rikard Froberg, technical director of eClassical.com wrote in an email. "The customer knows nothing about this, orders and pays but never gets the goods he paid for, or gets them very late (for instant delivery, the patience is very short) so it looks like the store ripping the customer off."

Others are fuming, too. Denizens of this forum, among others, are calling for the head of PayPal admins, who are said to have caused the outage when updating the instant payment notification (IPN) system. They also complain that PayPal was slow to acknowledge the problem. The company didn't inform users of the glitch until Friday afternoon, more than 24 hours after complaints began rolling in.

PayPal spokeswoman Amanda Pires said Saturday that a "percentage of merchants a percentage of the time" don't receive an IPN. Company developers are scrambling to fix the problem. "We are looking at this as a high priority fix," she said. "We've been working around the clock. We're hoping to have a fix as soon as possible."

Asked to estimate that percentage of customers or the percentage of times they receive failures, Pires said it's "much less than the majority of the time."

For his part, Froberg says all IPNs to eClassical.com are broken. The Sweden-based website sells DRM-free classical music in real time, so the glitch means that it's customers have paid for files they are unable to download. Many eCommerce websites run on scripts that don't complete a transaction until an IPN is received from PayPal. eClassical.com also accepts credit card payments.

The meltdown comes as eBay is requiring some customers to use PayPal if they want to continue using the service. It also comes on the heels of Friday's discovery of serious scripting error on the PayPal site that could have enabled attackers to create convincing spoof pages that stole users' authentication credentials. It took PayPal several hours, but the company's security pros eventually squashed the security bug. ®

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