BERLIN, Aug 27 (Reuters) - German banks blocked PayPal ( PYPL )

payments worth more than 10 billion euros ($11.7

billion) due to concerns about fraud, the Sueddeutsche Zeitung

newspaper reported on Wednesday.

The payments were halted on Monday after lenders flagged

millions of suspicious direct debits from PayPal ( PYPL ) that appeared

last week, the newspaper said, without specifying its sources.

"PayPal ( PYPL ) had a temporary service interruption that affected

certain transactions of our banking partners and possibly their

customers," the Sueddeutsche Zeitung quoted a PayPal ( PYPL )

spokesperson as saying.

Representatives of PayPal ( PYPL ) in both Germany and the United

States did not immediately respond to Reuters requests for

comment.

Shares of the U.S.-based payment app were 2.5% lower in

premarket trading, versus broadly flat indicators for the main

Wall Street indexes.

PayPal ( PYPL ) said on its website that a temporary service

interruption caused delays in transactions for a small number of

accounts over the weekend. "The issue has now been resolved,"

the statement said in German.

The company has a security system that usually filters out

scams trying to extract money from banks.

But the Sueddeutsche Zeitung said this system was either

completely or largely disrupted late last week, meaning the

payments app was sending unvetted direct debits to banks.

Germany's Savings Banks and Giro Association, representing

more than 300 local savings banks and financial service

providers, said in a statement on Wednesday that instances of

unauthorised direct debits from PayPal ( PYPL ) had a "significant impact

on payment transactions" throughout Europe, and particularly in

Germany.

The association added that PayPal ( PYPL ) transactions for Sparkasse

customers were operating as normal early on Tuesday and said

supervisory authorities had been informed of the incidents.

The BaFin regulator confirmed it had been informed but did

not provide any further details.

The Commission de Surveillance du Secteur Financier (CSSF),

the regulator in Luxembourg, where PayPal Europe has its

headquarters, declined to comment on PayPal ( PYPL ) specifically.

A spokesperson said there were currently no major ongoing

disruptions which required the regulator to intervene.

($1 = 0.8542 euros)