Payment Data Systems, Inc. Completes $950,000 Sale and Secures Profitability for Q4

Payment Data Systems, Inc. (OTC BB: PYDS), an integrated electronic payments solutions provider, announced today that it closed the transaction to sell the domain name and trademark of bills.com to Freedom Financial Network, LLC (FFN) of San Mateo, California. In conjunction with the close of the sale, we received cash of $950,000 and executed an agreement to build a private labeled bill payment site for FFN and provide related online payment processing services for an initial term of three years.

Michael Long, Chairman and CEO of PDS, said, We are very pleased to be able to close this transaction with Freedom Financial Network. The underlying agreements validate the viability of our strategy of private labeling and creates a cash position that significantly enhances our financial profile and opens up new opportunities for PDS. Long added, We look forward to a long and mutually beneficial relationship with Freedom. They are clearly executing a vision for growth and we are pleased to be able to play a part in that."

Andrew Housser, Co-CEO of Freedom Financial Network, said, We are very excited about the acquisition of bills.com and see this as a key step in enhancing our brand and profile in the consumer debt management industry. In addition we look forward to entering the fast growing bill payment space by partnering with one of the leading players in the industry.

About Payment Data Systems, Inc.

Payment Data Systems is an integrated payment solutions provider to merchants and billers. We provide an extensive set of tailored products to deliver world-class payment acceptance, processing, and risk/fraud management. Payment Data has solutions for merchants, billers, banks, service bureaus and card issuers. Whether you are in the market for card issuance, payment acceptance or bill payment solutions we have a solution for you.

Payment Data is the owner of the electronic bill payment portal, http://www.billx.com. Bills.com has the ability to transmit payments to thousands of national billers.

Payment Data is also the exclusive license holder of the rights to market the Carmen Electra gift and prepaid cards. To receive updates on the Carmen Electra card program sign-up at www.carmencard.com

Website: http://www.paymentdata.com

About Freedom Financial Network, LLC.

Freedom Financial Network, LLC (www.freedomfinancialnetwork.com) provides consumer debt resolution services through its Freedom Debt Relief and Freedom Tax Relief divisions. The company works for the consumer, negotiating with creditors to lower principal balances due that routinely result in savings of half the amount owed. Based in San Mateo, Calif., Freedom Financial Network serves more than 4,000 clients nationwide and manages more than $120 million in consumer debt, offering an alternative to bankruptcy, credit counseling, and debt consolidation.

FORWARD-LOOKING STATEMENTS DISCLAIMER

Except for the historical information contained herein, the matters discussed in this release include certain forward-looking statements, which are intended to be covered by safe harbors. Those statements include, but may not be limited to, all statements regarding our and managements intent, belief and expectations, such as statements concerning our future and our operating and growth strategy. Investors are cautioned that all forward-looking statements involve risks and uncertainties including, without limitation, the factors detailed from time to time in our filings with the Securities and Exchange Commission. One or more of these factors have affected, and in the future could affect, our businesses and financial results in the future and could cause actual results to differ materially from plans and projections. We believe that the assumptions underlying the forward-looking statements included in this release will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. All forward-looking statements made in this release are based on information presently available to our management. We assume no obligation to update any forward-looking statements, except as required by law.

Contact: Michael Long Payment Data Systems, Inc. Email Contact 210-249-4040