PayPal should be celebrated as a company who supports artists rights and an ethical internet. We were pleased to find this report on TorrentFreak this week stating that the online payment processing company has banned “Major File Hosting Services Over Piracy Concerns.”

In reviewing the User Agreement for PayPal™ Service we see what appears to be the operative language:

4. Prohibited Transactions. You agree that you will not use PayPal to accept payment for illegal products or services, including but not limited to materials that infringe the intellectual property rights of third parties. You will not use the Service, the PayPal website or any of the services offered therein for any unlawful or fraudulent activity. If PayPal (or Wells Fargo, in connection with processing credit card transactions) has reason to believe that you may be engaging in or have engaged in fraudulent, unlawful, or improper activity, including without limitation any violation of any terms and conditions of this Agreement, your access to the Service may be suspended or terminated. Further, if such behavior involved a MasterCard or VISA credit card transaction, it may result in you/your business being prevented from registering for payment acceptance through any payment provider or directly with any bank acquirer operating under license to either the MasterCard or VISA card associations. You will cooperate fully with PayPal Wells Fargo, MasterCard or VISA to investigate any suspected unlawful, fraudulent or improper activity, including but not limited to granting authorized PayPal representatives “guest” or “member” access to any password-protected portions of your website.

It seems to us that such a provision should be standard policy and best practices for many more companies operating online to ensure legal operations. We hope many more will adopt PayPal’s ethical standards.

It appears the message being sent by PayPal is resonating in the file hosting and cyber locker communities as Torrent Freak reports:

“This has a paralyzing effect on the file-hosting industry where 90% of the users of some sites pay using PayPal,” he added.

Previously most file-hosting sites relied heavily on PayPal, but they will now have to switch to alternatives. The next question is whether PayPal’s example will be followed by others such as Visa and Mastercard.

Well done PayPal. For those about to rock, we salute you!