Okay, something's very wrong here.
At first, I suspected this was a server issue, but now I'm not sure. If you're not getting the initial email, but you ARE getting the decline...
That's impossible.
I really, really hate it when impossible things happen.
Please open up a support ticket. In the ticket, include a valid FTP & admin login to your site & board, as well as the URL to this ticket. Be sure to note in the ticket that it should be assigned to me.
I'll give your board a good talking to and try to figure out exactly what's going on...