PayPal error 10009 - invalid merchant information

Refund Process

When you issue a refund to someone through PayPal, such as for an item purchased on eBay, the system uses funds available in your PayPal account first. If there is no money in your account, it then withdraws the funds from the bank account that's linked with your PayPal account.

Error Message

Along with your "10009" message, you likely received information that you don't have a verified ACH. Automated Clearing House, or ACH, is the network that handles electronic financial transactions, such as debit card payments and direct deposit transfers. The "ACH" included in your "10009" error message is a clue that something isn't set up properly between PayPal and your bank.

Confirmed Account

For PayPal to withdraw refund money from your bank account, the account must first be confirmed. This is an important step that sometimes takes two to three days to complete. Under your list of accounts, click on "Confirm Account." PayPal makes two tiny deposits in your account -- only a few cents each -- and asks you to tell them how much the deposits were. The deposits are then withdrawn, and your account is confirmed.

Other Options

If you prefer not to confirm your bank account with PayPal, there are a couple of options to complete your refund. If you accept PayPal payments regularly, wait until there are sufficient funds in your PayPal account to cover the refund amount. Alternatively, inform your buyer that you are sending them a money order to cover the refund amount.
Other Reasons

There are a few other reasons you might receive a 10009 error in PayPal. If your message says the transaction was refused, check your amount -- you probably entered a refund amount that was more than the original sale amount. You can send a person extra money through the "Send Money" feature on PayPal, but you can only refund money they already sent you. It's possible the buyer filed a complaint about the transaction, which could put a hold on a partial refund until the situation is resolved. The error message may also appear if you are trying to refund money in a different currency than the original transaction.

NOTE: this information was copied from http://pay0098.blogspot.com/2013/01/paypal-refund-error-10009.html