Disgruntled customers of PayPal have won an important battle after a US judge ruled its arbitration policy rigid and unfair.

The decision means that punters who use the online payment service and who maintain they've been treated horrendously (check out NoPayPal.com and PayPalWarning.com to hear some real horror stories) could take their cases to court, instead of PayPal's private arbitration system.

The ruling was issued on August 30 by US District Judge Jeremy Fogel of San Jose, who decided that people should not have to use PayPal's private arbitration system to settle disputes. Instead of customers having to travel to Santa Clara County for arbitration, they should be able to get them settled in court, he said.

According to the San Francisco Chronicle there are approx. 100,000 complaints outstanding at PayPal. In many instances disputes can run on for months leaving people frustrated and out of pocket as they are unable to access their accounts.

To make matters worse, those involved claim they been fobbed off by PayPal as they try and reach a settlement.

The judge also refused to dismiss a class action suit on this very issue, in which punters claim that PayPal illegally froze their accounts.

No one from PayPal was available for comment at the time of writing.

In July eBay announced its intention to buy PayPal for $1.5bn in stock although the merger still needs to clear a number of hurdles before it can go-ahead.

The online auction house says it will ditch online gaming transactions from PayPal's range of services once the deal is completed. ®