I have a similar problem.
After buying and selling on ebay for a few years, using paypal without a problem, I suddenly got an email to say that a payment had been refused due to lack of funds in my bank account. I knew this was wrong but felt I had to check to make sure. My bank account has a healthy balance but now I have a negative paypal balance showing and seem to be blocked from using paypal to both clear the refused payment and pay for other items I have "won" in auction.
Through no fault of my own I now find myself having to contact sellers and trying to explain why I've not yet paid for goods. To the seller it looks as though I'm bidding for items I can't afford to pay for, which is both untrue and very embarrassing.
My ebay, paypal and bank are all U.K.
