CCPA and AI Governance

Is Generative AI Compliant with CCPA?

Under the California Consumer Privacy Act (CCPA), as amended by the California Privacy Rights Act (CPRA), the use of generative AI systems introduces additional considerations when personal information is included in prompts. Depending on how these systems are used and configured, such data may be processed, disclosed, or retained in ways that fall under CCPA obligations.

This matters because:

• AI systems may process personal information through third-party services
• Data shared in prompts may be disclosed beyond what has been communicated to consumers at the time of collection
• CCPA applies to how personal information is collected, used, and shared

What the California Consumer Privacy Act (CCPA) Regulates

The California Consumer Privacy Act (CCPA) is a United States law that governs how businesses collect, use, and share personal information of California residents.

It applies to businesses that meet certain thresholds related to revenue, volume of personal data processed, or data monetization.

CCPA establishes rights for consumers and obligations for businesses, including:

Transparency in data collection, disclosure of how personal information is used, and rights for individuals to access, delete, and opt out of certain data sharing practices.

Key Terms (Simplified)

• Personal Information
  Information that identifies, relates to, describes, or could reasonably be linked with a particular consumer or household
• Business
  An entity that determines the purposes and means of processing personal information
• Service Provider / Contractor
  A third party that processes personal information on behalf of a business under contractual restrictions that limit how the data can be used

In generative AI workflows:

• the organization typically acts as the business
• the AI provider may act as a service provider or contractor, depending on how the system is configured and the contractual terms in place

Use of third-party systems does not remove responsibility for how personal information is handled.

Responsibilities of Organizations

Under CCPA, businesses are responsible for:

• providing notice about data collection and use
• using personal information in a manner consistent with, or reasonably related to, what has been disclosed to consumers
• honoring consumer rights (access, deletion, opt-out)
• implementing reasonable security procedures appropriate to the nature of the data
• ensuring required contractual terms are in place when engaging service providers or contractors

These responsibilities apply regardless of whether processing occurs internally or through third-party systems.

Why Generative AI Changes Risk

Generative AI systems may introduce additional considerations in how personal information is handled:

• data may be transmitted to external providers
• inputs may be processed by third-party systems, and depending on provider configuration and contractual terms, may be retained for operational purposes
• data may be used in contexts that extend beyond what was originally disclosed to consumers
• visibility into how data is handled may be limited or vary

These factors can make it more complex to ensure alignment with CCPA requirements.

Where AI Interacts with CCPA Requirements

Notice and Transparency

Businesses must disclose how personal information is collected and used. AI usage may introduce new processing contexts.

Use Consistent with Disclosed Purposes

Personal information should be used in ways consistent with, or reasonably related to, what was disclosed to consumers.

Sale or Sharing of Data

Use of third-party AI tools may, depending on context, raise questions about whether disclosure of personal information falls within CCPA definitions of “sale” or “sharing,” depending on the nature of the exchange and use of the data.

Service Provider Relationships

AI providers may need to meet requirements for service providers or contractors, including restrictions on how data is used.

What Teams Actually Do (and Where Risk Starts)

In practice, personal information may be used in generative AI workflows as part of routine tasks:

• a marketing team uploads customer lists to generate campaigns
• a support team pastes customer queries into AI tools
• a sales team analyzes lead data using generative AI
• an operations team processes user data for reporting

These actions are typically performed for efficiency. However, they may involve:

• sharing personal information with third-party systems
• processing data in contexts not clearly disclosed to consumers
• limited visibility into how data is handled after submission

Consumer Rights vs Generative AI

CCPA provides individuals with rights over their personal information, including:

• the right to know what data is collected and how it is used
• the right to request deletion of personal information
• the right to opt out of the sale or sharing of personal information, and under CPRA, to limit certain uses of sensitive personal information

In AI workflows, fulfilling these rights may require additional consideration:

• identifying where personal information appears across systems
• ensuring data can be deleted where required
• maintaining visibility into how data is used and shared

Risk Assessment and Generative AI

CCPA requires businesses to implement reasonable security procedures appropriate to the nature of the personal information and to ensure that data use aligns with disclosed purposes and applicable contractual obligations.

Generative AI may require additional evaluation depending on the use case, particularly where:

• personal information is shared with third-party providers
• data is used beyond originally disclosed purposes
• visibility into processing is limited

Businesses may need to assess whether additional controls or contractual protections are required.

Why AI Usage Becomes Difficult to Govern

Individually, these considerations may be manageable. In combination, they can create situations where:

• personal information is shared without consistent controls
• processing is not fully visible
• responsibilities are distributed across systems and teams

This can make it more complex to consistently demonstrate alignment with CCPA requirements.

The Core Problem: Prompts May Involve Data Disclosure

When personal information is included in prompts, it may involve:

• transmission of data to external systems
• processing of that data for specific tasks
• disclosure of personal information to third-party providers

Depending on the context, this may fall within CCPA definitions of sharing or disclosure.

Without appropriate controls, these interactions may be difficult to track or govern.

How AI Governance Supports CCPA Alignment

To support alignment with CCPA, businesses may implement controls that operate before and during AI usage.

These may include:

• identifying and limiting personal information shared with AI systems
• enforcing policies on acceptable data use
• maintaining visibility into AI usage
• implementing controls to prevent unauthorized data sharing

Such measures can help organizations manage how personal information is handled in AI workflows.

Where Wald.ai Fits

Wald provides controls that can be used to manage how personal information is handled in generative AI workflows.

This includes:

• detection of sensitive data in prompts and inputs
• contextual redaction and sanitization before data is sent to AI systems
• enforcement of usage policies across teams
• visibility into AI interactions for monitoring and review

These capabilities can support organizations in applying governance controls to AI usage.

FAQs

Is generative AI compliant with CCPA?
Generative AI can be used in a CCPA-aligned way depending on how it is configured, how personal information is handled, and whether appropriate disclosures and controls are in place.

Can personal information be entered into AI tools like ChatGPT?
Personal information should only be shared with systems where its use is consistent with disclosed purposes and where appropriate safeguards and contractual terms are in place.

Does using AI count as selling or sharing data under CCPA?
It depends on how the data is processed and the relationship with the third-party provider. In some cases, disclosure of personal information may fall within CCPA definitions of “sale” or “sharing.”

Why is AI governance important for CCPA?
AI governance helps businesses control how personal information is used, ensure transparency, and maintain compliance with consumer rights and disclosure requirements.

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