UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT
     PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934


Date  of  Report  (Date  of  earliest  event  reported)     December  6,  2005

                             PAYMENT  DATA  SYSTEMS,  INC.
             (Exact name of registrant as specified in its charter)

            NEVADA                     000-30152                 98-0190072
- -------------------------------       ------------          --------------------
(State  or  other  jurisdiction       (Commission             (IRS  Employer
      of  incorporation)              File  Number)         Identification  No.)

      12500  SAN  PEDRO,  SUITE  120,  SAN  ANTONIO,  TEXAS        78216
     ------------------------------------------------------      ----------
            (Address of principal executive offices)             (Zip Code)


Registrant's  telephone  number,  including  area  code        (210)  249-4100

 ------------------------------------------------------------------------------
          (Former name or former address, if changed since last report.)

Check  the  appropriate  box  below  if  the  Form  8-K  filing  is  intended to
simultaneously  satisfy  the  filing  obligation  of  the  registrant
under  any  of  the  following  provisions (see General Instruction A.2. below):

[   ]  Written  communications pursuant to Rule 425 under the Securities Act (17
       CFR  230.425)

[   ]  Soliciting  material  pursuant  to Rule 14a-12 under the Exchange Act (17
       CFR  240.14a-12)

[   ]  Pre-commencement  communications  pursuant  to  Rule  14d-2(b)  under the
       Exchange  Act  (17  CFR  240.14d-2(b))

[   ]  Pre-commencement  communications  pursuant  to  Rule  13e-4(c)  under the
       Exchange  Act  (17  CFR  240.13e-4(c))



ITEM  2.01  COMPLETION  OF  ACQUISITION  OR  DISPOSITION  OF  ASSETS.

On  December  6,  2005,  we  completed the sale of our bills.com domain name and
related  trademark rights to Freedom Financial Network, LLC for $950,000 under a
Trademark  and  Domain  Name  Purchase Agreement with its parent company, Alivio
Holdings,  LLC.  The  Trademark  and  Domain Name Purchase Agreement is filed as
Exhibit  10.1  to  this  current  report  on  Form  8-K. In conjunction with the
completion  of  the  sale,  we  received  cash  of  $950,000.

The  foregoing  description  of  the  terms and conditions of the Agreement  are
qualified  in  their  entirety  by,  and  made  subject  to,  the more  complete
information  set  forth  in  the  Trademark  and  Domain Name Purchase Agreement
included  on  this  Form  8-K  as  Exhibit  10.1,  and  incorporated  herein  by
reference.

This  report  contains  forward-looking  statements  that  involve  risks  and
uncertainties. We generally use words such as "believe," "may," "could," "will,"
"intend,"  "expect,"  "anticipate,"  "plan," and similar expressions to identify
forward-looking  statements.  You  should  not  place  undue  reliance  on these
forward-looking  statements.  Our  actual  results  could differ materially from
those  anticipated  in the forward-looking statements for many reasons including
our  ability  to  implement  our  business plan, our ability to raise additional
funds and manage our substantial debts, consumer acceptance of our products, our
ability  to  broaden our customer base, and other risks described in our reports
filed with the Securities and Exchange Commission from time to time. Although we
believe  the  expectations  reflected  in  the  forward-looking  statements  are
reasonable,  they  relate  only to events as of the date on which the statements
are  made,  and  our  future  results,  levels  of  activity,  performance  or
achievements  may not meet these expectations. We do not intend to update any of
the  forward-looking statements after the date of this document to conform these
statements  to  actual  results  or  to  changes  in our expectations, except as
required by law.

ITEM  9.01  FINANCIAL  STATEMENTS  AND  EXHIBITS.




              

EXHIBIT  NO.   DOCUMENT  DESCRIPTION
- ------------   -----------------------------------------------------------------

   10.1        Trademark and Domain Name Purchase Agreement  between the Company
               and  Alivio, Holdings, LLC, dated November 14, 2005 (included  as
               exhibit  10.1  to  the  Form  8-K  filed  November  17, 2005, and
               incorporated herein by reference).


                                    SIGNATURE

     Pursuant  to  the  requirements of the Securities Exchange Act of 1934, the
registrant  has  duly  caused  this  report  to  be  signed
on  its  behalf  by  the  undersigned  hereunto  duly  authorized.



                                                  Payment Data Systems, Inc.
                                                  --------------------------
                                                         (Registrant)
Date   December  9,  2005
       ------------------
                                                  /s/  Michael R.  Long
                                                  ---------------------
                                                        (Signature)
                                                  Michael  R.  Long
                                                  Chief  Executive  Officer  and
                                                  Chief  Financial  Officer