PayPal, the internet payment service, is being examined by federal and state investigators because of the number of customer accounts it has frozen in its efforts to beat online fraud, parent company eBay Inc has announced.

The reason for the investigation is to assess whether the company has violated consumer-protection laws by putting accounts on hold because of suspicious transactions.

eBays annual report is quoted as stating "If PayPal's processes are found to violate federal or state law on consumer protection and unfair business practices, it could be subject to an enforcement action or fines."