San Antonio, TX Nov. 15, 2005 Payment Data Systems, Inc. (NASDAQ OTCBB: PYDS) an integrated electronic payments solutions provider, today announced that it signed a Letter of Intent to sell the domain and trademark of billx.com to Alivio Holdings, LLC (Alivio), parent of Freedom Financial Network, LLC (FFN), Freedom Debt Relief, LLC (FDR) and Freedom Tax Relief, LLC (FTR) of San Mateo California.

The intended asset sale has a number of key and important strategic elements to it:

• PDS will sell the assets (domain and trademarks) of billx.com and related services to Alivio for $964,500 dollars.
• PDS will retain all assets of billx.com exclusive of the billx.com domain and billx.com trademark and gain new revenue.
• PDS and FFN will agree that PDS build and run a private labeled bill payment site for FFN.
• FFN will pay to PDS, a recurring fee for each subscriber they acquire into the new billx.com program, and guarantee $72,000 in minimum subscriber fees to PDS.
• FTR, a wholly owned affiliate of Alivio Holdings, LLC, will engage PDS for additional services not directly related to the billx.com transaction. This includes ACH processing, Returned Check processing, and credit card processing.
• FFN will commit a minimum of $180,000 to be applied to marketing bill payment services for the new billx.com website.
• FFN is projecting that the FFN billx.com website, powered by billx.com, could have over 5,000 subscribers within the next twelve months. This projected growth will generate over $25,000 a month in additional subscriber revenue for PDS.

Additional and important aspects of the transaction:

• PDS will rename our subsidiary billx.com, Inc. to Billx.com, Inc. or similar name.
• All existing customers of the current billx.com service will be ported to the new billx.com domain without service interruption.
• PDS, through billx.com, will not lose any existing revenue as a result of this transaction. In fact, servicing the new FFN billx.com website will bring in new revenue.

The anticipated effects of the agreement and the associated follow on transactions are:

• The transaction and related agreements should be accretive to earnings for PDS over the term of the agreements.

• Positions us for positive EBITDA (earnings before interest, taxes, depreciation and amortization) and net income in the fourth quarter of 2005 and eliminates our debt.
• Positions billx.com to accomplish a number of existing and new initiatives:
• Expands and enhances our ability to acquire and deliver private labeled sites for banks, debit card issuers, and credit unions quickly and efficiently. A differentiating and valuable component of our solution allows these private labels sites to be operated as payment consolidators for all bills not just their own bills.
• Enhances our ability to expand delivery of bill payment, account transfers, and debit card loading and bill payment into new PDS clients that have customer-facing needs in the debt management industry.

• Michael Long, Chairman and CEO of PDS said, “We are very pleased with this event. Clearly the agreements when fully executed validate the viability of our strategy of private labeling and creates a cash position that significantly changes our financial profile and opens up new opportunities for PDS.” Long added, “We expect these agreements to be completed within the current week.”

Andrew Housser, Co-CEO of Alivio and Freedom Financial Network, said “we are very excited about the acquisition of billx.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 the entering the fast growing bill payment space by partnering with one of the leading players in the industry.”

There will be a conference call on Wednesday November 16, at 10:00 a.m. Central Standard Time. Participants will dial 866-200-5830 or (International) 732-694-1588 and enter the PIN code followed by the # key: 106020#. During this call we will review our Q3 filings and answer your questions regarding this transaction.

About Payment Data Systems, Inc.

Payment Data Systems, Inc., is an Integrated Payments Solution Provider delivering comprehensive, cost-effective solutions to billers and retailers for the processing and management of electronic payments via the Internet, point of sale, or payments taken by Customer Service Representatives or an Interactive Voice Response (IVR). Additional products available from PDS include services and products that can be implemented more quickly and less expensively than the alternative of adding multiple payments companies as these solutions offer a full range of payment processing capabilities. These service offerings include: one time and recurring ACH debits and credits, electronic lockbox and returned check services, Web pay acceptance of credit cards and checks, telephone pay to Customer Service Representatives for acceptance of credit cards and checks, Interactive Voice Response systems which completely automate the payment receiving process, and data warehousing that enable the storage and retrieval of all payment history from one location. These are all managed within a single comprehensive storage and retrieval system thereby providing the customer consolidated tracking and reporting of all payment types regardless of source or channel. Payment Data is the owner of the electronic bill payment portal, http://www.billx.com. billx.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. Sign-up at www.carmencard.com to receive updates on the Carmen Electra card program. 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.