Data Privacy, Privacy

Using AI in Your Business? Don’t Skip the Privacy Disclosures

August 6, 2025

Artificial Intelligence (AI) is transforming how companies operate—streamlining customer support, enhancing personalization, automating hiring, and even making business forecasts more accurate. Today, AI isn’t just for Silicon Valley. Small and mid-sized businesses across the United States are embedding AI into their daily operations through platforms like automated chat assistants, behavioral analytics, and algorithmic decision-making tools.

However, what many business leaders overlook is that these AI-driven solutions are subject to privacy laws—especially when they involve personal data. And under new state laws like the Colorado Privacy Act (CPA), failure to disclose how your AI tools collect or infer information can expose your business to serious compliance risks.

What the Colorado Privacy Act (CPA) Says About AI and Profiling

The Colorado Privacy Act, which went into effect on July 1, 2023, imposes specific obligations on businesses that collect personal data from Colorado residents. This includes requirements around transparency, profiling, and consumer rights when it comes to automated decision-making.

Under the CPA, “profiling” is defined as the automated processing of personal data to evaluate, analyze, or predict personal aspects of an individual—such as economic status, health, preferences, behavior, location, or movements.

If your company uses AI to do any of the following:

Recommend products or content based on user behavior,
Automate hiring or credit decisions,
Score leads or assign customer value,
Adjust pricing based on predictive analytics,
Use chatbots that collect user information for targeting or decision-making…

Then your AI tools are likely considered to be engaging in profiling under the CPA.

In these cases, you are legally required to:

Clearly disclose the use of profiling or automated decision-making,
Explain the logic and purpose behind such processing in your privacy policy,
Offer consumers the right to opt out of profiling when it produces legal or similarly significant effects.

Why This Matters to Business Leaders and CEOs

It’s no longer sufficient to rely on generic or outdated privacy policies. Consumers—and regulators—are increasingly focused on how personal data is used behind the scenes, particularly by automated systems.

Business leaders must now consider the following:

Have we updated our privacy policy to reflect any AI-driven tools we’ve adopted?
Do we disclose when personal data is used to profile users or make automated decisions?
Are we offering a mechanism for users to opt out of profiling or targeted decision-making?
Are we documenting these data practices in the event of a regulatory audit?

Even if you’re using third-party platforms (e.g., CRM software with AI features, automated marketing tools, AI-based resume screeners), your company is still responsible for meeting CPA requirements. Vendor reliance does not remove liability from your organization.

Common Mistake: Thinking Small Businesses Are Exempt

One of the most dangerous assumptions CEOs make is believing that privacy laws only apply to large corporations. Under the CPA, if your company:

Controls or processes the personal data of 100,000 or more Colorado consumers per year, or
Derives revenue from the sale of personal data and processes the data of 25,000 or more consumers annually…

You must comply, regardless of your company’s size. Many growing e-commerce businesses, service providers, and SaaS platforms fall into these thresholds without realizing it.

How Curated Privacy LLC Can Help

At Curated Privacy LLC, we help companies integrate AI innovation responsibly—ensuring that their data practices remain aligned with privacy laws like the Colorado Privacy Act. Our expertise goes beyond general compliance. We work directly with company leadership to ensure:

Clear and compliant privacy disclosures specific to AI and profiling practices,
Guidance on identifying which of your business tools qualify as automated decision-making systems,
Review and improvement of your privacy notices, internal processes, and vendor contracts,
Documentation strategies in case of enforcement actions or privacy audits,
Practical risk mitigation that protects your reputation and customer trust.

We offer FREE consultations to U.S.-based businesses who are unsure if their use of AI and personal data is creating hidden compliance risks.