Visa replied to a letter sent by Ms. Madeleine Morris (BannedWriters.com) denying that they were pressuring PayPal to limit the sale of certain erotica content. Read their response and comments here.
To be fair PayPal never mentioned credit card companies or banks by name. I believe they said that their “financial partners” were requiring them to limit sales. The other credit card companies have not responded yet.
This kind of blows my theory out of the water, but I still wonder what was really behind PayPal’s decision. Ebay, who owns PayPal, offers thousands of items of “objectionable” material. A study of the Ebay site can be found here. All this must be catching up to PayPal because they will soon announce revised content policies that I expect will please the indie publishing community.