It is well known that plane Couette flow for an Oldroyd-B fluid is linearly stable, yet, most numerical methods predict spurious instabilities at sufficiently high Weissenberg number. In this paper we examine the reasons which cause this qualitative discrepancy. We identify a family of distribution-valued eigenfunctions, which have been overlooked by previous analyses. These singular eigenfunctions span a family of nonmodal stress perturbations which are divergence-free, and therefore do not couple back into the velocity field. Although these perturbations decay eventually, they exhibit transient amplification during which their "passive" transport by shearing streamlines generates large cross-stream gradients. This filamentation process produces numerical under-resolution, accompanied with a growth of truncation errors. We believe that the unphysical behavior has to be addressed by fine-scale modelling, such as artificial stress diffusivity, or other non-local couplings. (c) 2005 Elsevier B.V. All rights reserved.