Ditched all dealings with PP for exactly the same thing 

I had a similar issue with PayPal where they took it upon themselves to "protect me from potential fraud" by blocking me from sending money to the same person I had been sending money to for weeks with a payment plan. Even when I called they refused to lift the "protective block" and the only way I could send that person money through PayPal was to buy one of those stupid MoneyPak cards, load it and send it that way.
As if that somehow was going to protect me.
Even now they refuse to let me send money to that person. They claim they cannot override it.
I hate PayPal.