The game of cat and mouse between Netflix and those customers trying to sneak into watching content from overseas libraries has taken an interesting turn, with e-payments service PayPal refusing to process payments from at least one virtual private network (VPN) provider.

In a letter reproduced in full by TorrentFreak, PayPal said Canadian company UnoTelly was violating its Acceptable Use Policy regarding "sales/offers" on its website, and that it had "permanently limited" UnoTelly's account as a result.

"Under the PayPal Acceptable Use Policy, PayPal may not be used to send or receive payments for items that infringe or violate any copyright, trademark, right of publicity or privacy, or any other proprietary right under the laws of any jurisdiction," the company wrote.

"This includes transactions for any device or technological measure that descrambles a scrambled work, decrypts an encrypted work or otherwise avoids, bypasses, removes, deactivates or impairs a technological measure without the authority of the copyright owner."

PayPal said UnoTelly could not appeal the decision.UnoTelly told TorrentFreak it was disappointed by the decision.

It published a blog post apologising to customers for the changed circumstances and asking any customers who had used PayPal to switch to paying for its VPN service with a credit card instead.

VPNs and DNS proxy services are popular with online video streaming customers, particularly in Australia, because they can be used to trick the service into thinking the user resides in another country for example, the US so they can then access overseas content.

Thanks to discrepancies in territorial licensing agreements, the US Netflix library has several thousand more titles available than the Australian Netflix library.

Some TV and movie fans use the technology to access services that are not available in Australia at all, including US-based streaming services from HBO, Hulu and Amazon, or the BBC's online player.

However PayPal's ruthless decision has some people scratching their heads. A VPN has other, arguably more legitimate, uses, such as providing a secure network for private communications, which may be an indispensable tool for some businesses.

It's unclear yet whether PayPal will stop processing payments with any other VPN services.
Some have speculated the company will only target VPN and DNS proxy providers that explicitly market themselves as tools to circumvent geo-blocking.

UnoTelly is one such service it's in the name.

Fairfax Media contacted several VPN providers about the issue.

Of those that responded in time, all said PayPal was continuing to process payments.

A PayPal spokesperson confirmed PayPal had "recently discontinued service to certain businesses that actively promote their services as a means to circumvent copyright restrictions and violate intellectual property laws".

"We apologise for any disappointment this may cause our users," the spokesperson said.

While neither PayPal's email nor UnoTelly's blog post specifically mentioned Netflix, the timing is uncanny.

Just weeks ago the global streaming service announced a crackdown on customers circumventing its geo-blocks, at the behest of the companies who own the licenses to the content it streams.

Australian users were some of the first to get kicked out of watching overseas content, with Netflix telling them to turn off their proxy services if they wanted to continue watching.

However some VPN and DNS proxy providers were quick to find workarounds to the crackdown.

A reader said PayPal has also severed its ties with VPN provider Unblock-Us. Fairfax has sought comment from the provider.