"Enable user activation" feature not working on my server

I developed a site locally where a customer fills out an application form and pays the application fee (using paypal add-on). After submitting payment, the admin must approve or deny the user registration request before the user becomes active. This is working 100% on my local machine.

When I move to my server, it is not working. The user gets registered without the admin having to approve or deny. Strangely, the user still shows up in the list of pending registrations, and an error saying "the user already exists" shows up when activating the registration.

Is there something on my server that is outdated and needs updating to get this to work? I'm mirroring the settings between dev and production, so I don't think anything is wrong there.

Okay...

Manual user activation does not work when paired with the Paypal add-on.

I'm using a gravity form as an application form. The application form has an application fee, being taken care of with the PayPal add-on. But I don't want the user to be registered until the admin has reviewed the application and manually activated the user's account, with the user registration add-on.

Is this really not possible? Perhaps just a bug?

Thanks for any and all help.