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Borders CRM Data Still In Play

July 21st, 2011

What if Congress—or a federal court—decided to declare that personal information in CRM systems really does belong to customers? That would cut CRM data out of bankruptcy assets, unless a buyer was willing to contact every customer to get opt-in all over again.

But it could also change the legal landscape for how security breaches involving CRM data are handled. And it could force all U.S. retailers to offer customers the ability to block retailers from handing off their personal information to third parties without explicit permission. That could dramatically complicate how loyalty programs can be run, in addition to forcing something like PCI requirements on CRM data.

All of that may ride on how responsible the high bidder in the coming intellectual property part of the Borders bankruptcy auction is. There’s got to be a better way for retailers to keep privacy promises, even beyond the bankruptcy grave.

Maybe it would mean loyalty-program agreements with customers that explicitly state personally identifiable data given to retailers by customers is the customers’ property and only on loan to the retailers. That way it’s not an asset. No asset, no bankruptcy auction.

But that would require a loyalty customer to opt out—and withdraw that personal information—at any time. It might also raise the stakes in the case of a data breach, because the retailer would have allowed not just information about a customer to be stolen but the customer’s own intellectual property.

Or maybe it means a retailer would hand off ownership of the CRM data to a third party and lease it back for use under strictly defined terms. Once again, it’s no longer an asset, so it can’t be sold at bankruptcy. Terms of transfer of the data to the third party might specify the conditions under which the retailer could buy it back—say, in the event of the retailer’s acquisition as a going concern but not if the retailer goes bankrupt.

That would require finding (or funding) such an independent third party and making sure the company is disconnected enough to not be caught up in a bankruptcy but reliable enough to be trusted with CRM data privacy. And those data-handoff agreements would have to be very carefully written, so no one could acquire the third party and walk away with all that customer data.

It’s all much more complicated and costly than an empty promise by a retailer to customers that “your personal information belongs to you.” But it may only take a few cases of misused customer data from retailer bankruptcies to sour customers on loyalty programs. And for retailers, that could get very expensive.


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