Borders may have gone bankrupt, but it has yet to sell off its most valuable books: customer credit card data. The Federal Trade Commission filed court document in September, advising attorneys handling the retail chain's bankruptcy sale that it would watch closely to ensure financial data didn't end up in the wrong hands.
In a letter dated Sep. 14, FTC Bureau of Consumer Protection director David Vladeck cited some of the FTC's past actions involving bankrupt merchants. The potential dispute involves Borders' database of customer receipts, potentially dating back decades. If bankruptcy trustees win permission to sell that database as a standalone asset, archivists could use portions of credit card numbers to match customer purchases with consumer profiles.
So what's wrong with that?
The practice seems innocent enough, on the surface. A Borders customer who frequently purchased books about recreational sailboating could have that information added to a commercial database that includes contact information gleaned from instant approval credit card applications or other public records. Marketers could use that database to compile lists of prospective boat buyers, then invite them to boat shows or other special events.
FTC officials have expressed concern that these deeper data mining practices could invade the privacy of Borders customers who may not have realized that their credit card information was used to create traceable purchase histories. Customers purchasing explicit or potentially embarrassing books and videos may have no control over how new owners might exploit those records.
Credit card purchases and privacy policies
Vladeck cited the FTC's lawsuit against Toysmart, a bankrupt retailer that intended to auction off its customer database. The FTC settled that case with the provision that a customer database could only be used by a similar retailer for generally accepted marketing purposes. He also suggested that any prospective buyer for Borders' assets would have to disclose their intended use for the retailers' credit card transaction histories to avoid FTC scrutiny.