I’m guessing maybe it was a German or European policy issue. I googled it and found similar stories on some random Australian forum.
I’m pretty sure in the US they’d refund you out of their own money. Different laws and regulations, I guess.
I could see that being a possibility, given that Americans would have easier ways to contact and bother paypal about it back then and get their money from them. Some random overseas problem could be easier brushed off.