From the Chicago Tribune via Reuters (PayPal backtracks on e-book policy):
PayPal, the online payment service owned by eBay Inc., is backtracking on its policy against processing sales of e-books containing themes of rape, bestiality or incest after protests from authors and anti-censorship activist groups.
PayPal’s new policy will focus only on e-books that contain potentially illegal images, not e-books that are limited to just text, spokesman Anuj Nayar said on Tuesday. The service will still refuse, however, to process payments for text-only e-books containing child pornography themes.
Read more at the Chicago Tribune.