Problem encrypting password

I am using PHPRunner Enterprise v7.0 with a MySQL database. I have a Users table with a Password field. I have set this field to encrypted using the encryption screen in v7. When a new user registers and types in his password on the registration form, the password appears in the database in clear text, not encrypted. The new user is unable to log in using this password. If I manually replace the clear text password in the database with an the encrypted string, the log-in works. I have tried with both database and code encryption and have the same problem. Any ideas?
Douglas