I have used Paypal for almost 9 years and in that time my account has been locked so many times I have lost count. Paypal have such a monopoly that they can treat people however they like and use there massive cash reserves to self regulate in Europe.
My worst dispute was for almost $20k when they locked my account as my GF was scammed on Ebay selling an autograph. She kept the payment/send receipt for almost 3 weeks then she got a chargeback from Paypal which she disputed as the buyer told her on the phone it was perfect.
As her account was pretty new they locked it right away and then in about 3 hours my account was locked as i was associated due to having the same landline phone number. I called them up and they told me that it was a safety measure so my GF could not use my account to sell on Ebay and once her account was live again so would mine.
After a couple of days I gave up with paypal uk (or ierland) and spent $600 calling the US trying to get them to escalate it to an executive. After days of fighting I got a result when it went to a special department who requested i send in copies of invoices etc to prove the money was mine. It took about 14 days to reopen the accounts which is pathetic when people use it for business.
Things I learned
1. When you sign up ask them to limit you right away and send them EVERYTHING they need like Passport, driving licence and utility bills.
2. If you intent to use the account for business then tell them in advance so they can ask for documentation early. Once you hit $5k they normally limit you anyway until they get the info
3. Do not use any of the same details of your friends, family etc as they will attach you to the account and should they default you will end up getting shafted.
4. Read all the T&C as in reality when you sign up with them your money is NOT safe.
I also know from talking with an ex Paypal marketing guy that they once introduced better sign up protection but conversions went down so they opened it up again so any Muppet can create an account in seconds and abuse the system.
I know of a number of UK based businesses that have went bust due to paypal including one guy who was selling memory card sand had a huge T/O. PP put his account under review and by the time they finished all the paperwork he was left unable to pay creditors on time and they withdrew his invoice facility resulting in him going bust.
I would bin Paypal all together if I could but there's so many people using it that it means lost revenue if you don't use it.