Disclosing Your Use of AI To Clients

April 25, 2026

Why and How to Disclose Your AI Use in 2026

In the business world of 2026, transparency isn’t just a “nice-to-have” value—it’s a legal requirement. As of April 1, 2026, the Maryland Online Data Privacy Act (MODPA) is officially under enforcement, joining a wave of federal and international laws that demand clarity when artificial intelligence is in the driver’s seat.

Whether you’re using an AI chatbot for customer service, an algorithm to set prices, or generative tools to create client reports, your customers have a right to know. Here is how to navigate the “Disclosure Era” without losing your customers’ trust.

1. Why You Must Disclose (The Legal Reality)

The days of “shadow AI” are over. Regulators are no longer looking for “intent to deceive”; they are looking for transparency.

  • MODPA Enforcement: If your business serves Maryland residents, you are now legally required to disclose when you use “automated decision-making” or “profiling.” Customers have the right to opt-out of these AI-driven processes. 

  • The FTC’s Stance: Following the March 2026 FTC Policy Statement, any company that fails to label AI-generated content or claims “human-made” quality for AI-produced work is at risk of “unfair or deceptive acts” charges.

  • The EU Standard: If you have international clients, the EU AI Act’s August 2026 deadline is looming. It mandates visible labels (like the “cr” icon) for any synthetic content.

2. What AI Actually Does With Customer Information

The #1 question your customers have is: “Where does my data go?” To answer them, you need to understand the three stages of the AI data lifecycle:

A. The Input (Ingestion)

When a customer types a question into your AI chatbot or uploads a document, that is “Input Data.” Under 2026 privacy laws, you must only collect what is “strictly necessary” to provide the service. 

B. The Processing (Black Box)

The AI “reads” the data to generate an answer. Most enterprise-grade AI tools now offer “Zero-Retention” or “Private Instance” modes. This means the AI processes the data in a secure “bubble” and forgets it as soon as the session ends.

C. The Training (The Big Risk)

This is where many businesses get in trouble. Some AI models use customer inputs to “learn” and improve. If you haven’t explicitly asked for opt-in consent, you could be accidentally leaking your customer’s proprietary info back into the public AI model.

3. How to Disclose: The “Clear & Conspicuous” Standard

In 2026, a link buried in your 50-page Terms of Service is not enough. You need to be front-and-center.

Visible Labels

If you are sending an AI-generated image or report, use the industry-standard “cr” (Content Credentials) icon or a simple watermark.

  • Example: “This report was generated with the assistance of [AI Tool Name] and reviewed by a human expert for accuracy.”

Chatbot Greetings

Don’t let your AI pretend to be a person named “Sarah.”

  • Example: “Hi! I’m [Company Name]’s AI assistant. I can help you with [Task]. Your data is processed securely and is not used to train our models.”

4. A Template You Can Use Today

If you want to update your website or client agreements, here is a simple, 2026-compliant disclosure template:

AI Transparency & Data Usage Disclosure

To provide you with faster and more accurate service, [Business Name] utilizes Artificial Intelligence (AI).

How we use AI: We use AI for [e.g., analyzing data trends / generating initial drafts / customer support].

Your Data Privacy: Any information you provide is used solely to fulfill your request. We utilize “Enterprise Privacy” settings, meaning your data is not stored by the AI provider and is not used to train future AI models.

Human Oversight: All AI outputs are reviewed by our team to ensure quality and accuracy.

Final Thought: Trust is Your Competitive Advantage

In a world full of deepfakes and automated “slop,” being the business that says, “Yes, we use AI, and here is exactly how we protect you,” is a massive competitive advantage.

Don’t wait for a MODPA audit or an FTC warning letter. Make transparency a feature of your brand, not a bug in your legal department.

Need to audit your current AI tools for MODPA compliance?  What part of the AI disclosure process feels like the biggest “trial and error” hurdle for your team right now?

Let’s look at your “Data Minimization” strategy before the Q2 deadline!