Feb. 27, 2012 at 12:37 PM ET
PayPal is known for handling electronic payments for merchandise, not for censoring content. But in recent weeks, the company has been letting e-book publishers know that PayPal will no longer handle transactions for e-books its considers to be obscene.
One e-book publisher, Smashwords, let its writers know of the change in a letter posted on its website, with Smashwords founder Mark Coker writing that the publisher is modifying its Terms of Service "to clarify our policies regarding erotic fiction that contains bestiality, rape and incest."
PayPal is requiring Smashwords to immediately begin removing the above-mentioned categories of books. Please review your title(s) and proactively remove and archive such works if you are affected ...
As you may have heard, in the last couple weeks PayPal began aggressively enforcing a prohibition against online retailers selling certain types of "obscene" content.
Coker said that on Feb. 18, PayPal's enforcement division "contacted Smashwords with an ultimatum. As with the other e-book retailers affected by this enforcement, PayPal gave us only a few days to achieve compliance otherwise they threatened to deactivate our PayPal services. I've had multiple conversations with PayPal over the last several days to better understand their requirements."
A PayPal spokesperson, in a statement to msnbc.com, said that "in general" PayPal allows its service "to be used for the sale of erotic books, but we have to draw the line on certain adult content that is extremely or potentially illegal."
While the company says it "can't comment on the specifics of the Smashwords account, we can confirm that we are working directly with Mr. Coker to resolve this issue. Payments to the Smashwords account have not been suspended and Mr. Coker is able to use his account as normal."