I don't think that's the issue, the issue was that they suspended accounts and sites that had already been payed for, and the only payment method the company offers is PayPal so there was no reasonable way for the customer to pay the outstanding ballance immediately (About $5 from the looks of it). He also offered proof that the small outstanding ballance would be payed within a couple of days.

Yes if it was +$100 maybe more serious action should have been taken, but it was just one domain on an account that, up to that point, had never had any issues with payments before (I'm assuming that but the support guy is so defensive I'm sure it would have been brought up before now). Even so there is no reason to just straight out cancel someones entire account without even contacting them, for all they knew the payment could have gone through without a problem.