Evan Schuman's StorefrontBacktalk

With all the attention on the closing of the almost 400 remaining Borders stores, the chain’s IT jewel—purchase history and other CRM data on tens of millions of its customers—is still to be sold to the highest bidder. When that happens, any privacy promises Borders made to loyalty-program customers are out the window. If the CRM data is misused by the buyer, that could spark a legal crackdown on what retailers can do with the information customers give them.

Unfortunately, bankruptcy courts really don’t care what promises were made to collect CRM data—it’s an asset, so it’s for sale. Unless retailers can find a way to enforce customer privacy even after the retailer has gone belly-up (something no retailer wants to think about in creating a loyalty program), there’s a very real risk of losing customer trust—and gaining the unwanted attention of politicians who have discovered that privacy is now a popular buzzword.

Any new approach to CRM privacy will come too late for Borders, whose inventory and store fixtures will be sold off starting on Friday (July 22) and continuing through the end of September. But the companies handling the store liquidations—Hilco Merchant Resources and Gordon Brothers Group—aren’t dealing with Borders’ intellectual property, which includes the CRM data, the Borders brand and Borders.com. Those will be auctioned off separately, and the buyer could decide to relaunch Borders as an online-only retailer. (That’s what happened when Circuit City was shuttered and its name and CRM data were snapped up by online electronics retailer Systemax.)

Borders did try to limit the information available about CRM data in its bankruptcy filings. According to the Borders schedule of assets, “Agreements with individuals under the Borders Rewards loyalty program have been excluded in order to consistently keep confidential personal information about our customers.” That’s boilerplate language from the days when Borders still thought it could be sold as a going concern.

It also sounds a lot like the wording that begins the privacy policy for the Borders Rewards loyalty program. According to that policy, Borders and its subsidiaries “believe that your personal information—including your purchase history, phone number(s), E-mail and residential addresses and credit-card data—belongs to you.” It continues: “We will only disclose your E-mail address or other personal information to third parties if you expressly consent to such disclosure.”

To a customer signing up for a loyalty program, that probably sounds pretty airtight—customer data is going nowhere without each customer’s express permission.