I'm not blaming PayPal for this, I agree I was not aware of this ToS, I am just making the point that they are pushing away legitimate business because of this policy.
But I doubt you can call it unforgivable. You can't tell me you have read every single ToS to every single service you have signed up to in full and detail. PayPal makes it more clear on their signup about this these days but I signed up a few years ago. It wasn't as clearly spelt out.