If you have activated PayPal Payments Pro for your store and you get the following error:
This transaction cannot be processed due to an invalid merchant configuration
PayPal’s explanation of this error code from their API Documentation:
10500: Occurs when you have not agreed to the billing agreement.
You need to contact PayPal to correct this error.
In simple terms, this occurs for one of the following:
a) You do not have a PayPal Payments Pro approved account
PayPal Payments Pro requires a separate application, approval, and monthly fee over a standard business account. You have to compete this application process before you can use PayPal Payments Pro
b) You have a Pro account, but you haven’t agreed to the billing agreement
There is an online form you have to agree to the monthly billing and processing fees for Pro that is different from a standard PayPal account. If you have not agreed to this, they don’t let you send Pro payments.