First Data 2007 Annual Report Download - page 24

The Company and its customers are subject to regulations that affect the electronic payments industry in the many countries in which the Company's services
are used. In particular, the Company's customers are subject to numerous regulations applicable to banks, financial institutions and card issuers in the United
States and abroad, and, consequently, the Company is at times affected by such federal, state and local regulations. Regulation of the payments industry,
including regulations applicable to the Company and its customers, has increased significantly in recent years. Failure to comply with regulations may result
in the suspension or revocation of license or registration, the limitation, suspension or termination of service, and/or the imposition of civil and criminal
penalties, including fines which could have an adverse effect on the Company's financial condition. The Company is subject to U.S. and international
financial services regulations, a myriad of consumer protection laws, escheat regulations and privacy and information security regulations to name only a few.
Changes to legal rules and regulations, or interpretation or enforcement thereof, could have a negative financial effect on the Company. In addition, even an
inadvertent failure by the Company to comply with laws and regulations, as well as rapidly evolving social expectations of corporate fairness, could damage
the Company's reputation or brands. There is also increasing scrutiny of a number of credit card practices, from which some of the Company's customers
derive significant revenue, by the U.S. Congress and governmental agencies. For example, the Senate Permanent Subcommittee on Investigations has
considered the methods used to calculate finance charges and allocate payments received from cardholders, and the methods by which default interest rates,
late fees and over-the-credit-limit fees are determined, imposed and disclosed. These investigative efforts and other congressional activity could lead to
legislation and/or regulation that could have a material impact on the Company's customers' businesses and the Company's business if implemented. Any such
legislative or regulation restrictions on the Company's customers' ability to operate their credit card programs or to price credit freely could result in reduced
revenue and increased cost for the Company's customers, reduced amounts of credit available to consumers and, therefore, a potential reduction of the
Company's transaction volume and revenues. The Company has structured its business in accordance with existing tax laws and interpretations of such laws
which have been confirmed through either tax rulings or opinions obtained in various jurisdictions including those related to value added taxes in Europe.
Changes in tax laws or their interpretations could decrease the value of revenues the Company receives and have a material adverse impact on the Company's
business.
Failure to protect the Company's intellectual property rights and defend itself from potential patent infringement claims may diminish the Company's
competitive advantages or restrict it from delivering the Company's services.
The Company's trademarks, patents and other intellectual property are important to its future success. The STAR trade name is an intellectual property right
which is individually material to the Company. The STAR trade name is widely recognized and is associated with quality and reliable service. Loss of the
proprietary use of the STAR trade name or a diminution in the perceived quality associated with this name could harm the Company's growth in the debit
network business. The Company also relies on proprietary technology. It is possible that others will independently develop the same or similar technology.
Assurance of protecting its trade secrets, know-how or other proprietary information cannot be guaranteed. The Company's patents could be challenged,
invalidated or circumvented by others and may not be of sufficient scope or strength to provide the Company with any meaningful protection or advantage. If
the Company was unable to maintain the proprietary nature of its technologies, the Company could lose competitive advantages and be materially adversely
affected. The laws of certain foreign countries in which the Company does business or contemplate doing business in the future do not recognize intellectual
property rights or protect them to the same extent as do the laws of the United States. Adverse determinations in judicial or administrative proceedings could
prevent the Company from selling the Company's services or prevent the Company from preventing others from selling competing services, and thereby may
have a material adverse affect on the business and results of operations. Additionally, claims have been made, are currently pending, and other claims may be
made in the future, with regards to the Company's technology infringing on a patent or other intellectual property rights. Unfavorable resolution of these
claims could either result in the Company being restricted from delivering the related service or result in a settlement that could be material to the Company.
Material breaches in security of the Company's systems may have a significant effect on the Company's business.
The uninterrupted operation of the Company's information systems and the confidentiality of the customer/consumer information that resides on such systems
are critical to the successful operations of the Company's business. The Company has security, backup and recovery systems in place, as well as a business
continuity plan to ensure the system will not be inoperable. The Company also has what it deems sufficient security around the system to prevent
unauthorized access to the system. An information breach in the system and loss of confidential information such as credit card numbers and related
information could have a longer and more significant impact on the business operations than a hardware failure. The loss of confidential information could
result in losing the customers' confidence and thus the loss of their business, as well as imposition of fines and damages.
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