In fairness, this story is consistent with my own (limited) experience dealing with EU law. A few years ago, I was trying to determine if an EU based company I was advising really needed to offer the now-ubiquitous cookie advisories. I met with some very high profile (and very expensive) lawyers, who told me that although I technically needed to include the various popups and advisories, I was not in any real danger, because of selective enforcement. Eventually, they changed their mind and we added the sliders anyway, but for a time, the law was stricter than the actual enforcement.

But I was an american being advised by a top tier british law firm. How is a random guy releasing free (or cheap) services on the internet supposed to deal with a situation like that? The arbitrary nature of the enforcement is exactly what makes this a problem. If there were strong penalties, but clear ways to remain in compliance, this developer might have made a different call.

If I know I'm technically out of compliance, and I don't have a high powered lawyer telling me it's not a big deal, then I'm not sleeping well. And if I can solve the problem once and for all by taking the unfortunate step of simply cutting EU residents off of the service, then I'm going to at least consider that option, and probably take it in the short term.

If the EU wants to reassure people that "The regulators send a letter asking you to come back into compliance unless you've been really bad. They only move to fines if you ignore them." then they would be well advised to make that very clear. If they don't, you're going to see more of this, and really, if it's true, why wouldn't they?