eBay's PayPal has acknowledged a serious cross-site scripting (XSS) flaw that could be used to steal user credentials or cookies.

The page affected used an Extended Validation SSL (EV-SSL) certificate, according to Harry Sintonen, the Finnish researcher who discovered the flaw, casting doubt on the claims of EV-SSL to assure users of more secure web pages.

The flaw surfaced just as PayPal was hit by a technical bug that has caused chaos for many e-commerce websites.

Sintonen on Friday demonstrated the use of cross-site scripting on a PayPal web page to prompt users for their login credentials and send the credentials to an unauthorised server, according to several industry reports.

Sintonen also injected code that caused a pop-up window to appear on the page and said the flaw could be used to steal user cookies.

In a statement, PayPal said it was not aware of any phishing attacks carried out using the flaw. "As soon as we were informed of this exploit, we began working very quickly to shut it down," the company stated.

The page affected uses an EV-SSL certificate, a type of certificate that requires more extensive checks into the identity of the body requesting the certificate than conventional SSL certificates.

Newer browsers, such as Internet Explorer 7 and the upcoming Firefox 3, change the colour of the address bar to green when displaying a site using EV-SSL.

The mechanism was devised as a response to the increasing use of SSL certificates by fraudulent websites in order to give their sites an aura of security.

In April PayPal argued EV-SSL was critical for combating fraud and said browsers that don't support the standard are "insecure" and should be blocked from the PayPal site.

While EV-SSL requires validation of the identity of the requesting website, it does not guarantee that a page is free from security flaws. During Sintonen's demonstration, for instance, the address bar remained green.

Also on Friday, PayPal notified merchants that a problem with Instant Payment Notification (IPN) was preventing IPN transactions from completing properly.

The problem, which was resolved over the weekend, caused users to be charged but did not allow merchants to receive notification, meaning orders would arrive late or not at all.