updated 9/13/2004 6:21:50 PM ET 2004-09-13T22:21:50

PayPal will start fining customers up to $500 for using the online payment service on gambling, pornography and illegal sales of prescription drugs.

Those payments are already prohibited under PayPal's acceptable-use policy, but Sept. 24 marks the first time the eBay Inc.-owned company will fine customers for any violations. PayPal also said it could take legal action to recoup any costs not covered by fines.

PayPal spokeswoman Amanda Pires said Monday that the policy covers only people or companies selling barred products, though those attempting to pay for them could have their accounts curtailed or closed.

PayPal has barred gambling-related payments since 2002, when eBay acquired it. In 2003, it stopped handling payments for adult-oriented content. Pires said those industries were targeted because they tend to experience more fraud than others.

PayPal will continue to process payments for online pharmaceuticals as long as the sellers are certified by the National Association of Boards of Pharmacy.

"This is a new policy to ensure that online pharmaceutical companies are dispensing drugs within the law," Pires said.

PayPal posted its new policy last month.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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