Rental agencies can face data privacy, regulatory, legal and fraud risks when implementing AI technologies.  -  Pixabay

Rental agencies can face data privacy, regulatory, legal and fraud risks when implementing AI technologies.



ChatGPT is already in automotive. Rental car companies are beginning to use AI tools into their systems and processes to ensure a smooth customer journey. But despite the benefits, integrating advanced technologies such as Artificial Intelligence (AI), Machine Learning (ML), Neural Networks (NN), and Semantic Search (SS) into a single platform like the Generative Pre-trained Transformer (GPT) also raises significant legal, ethical, and regulatory concerns for the car rental industry.

Adopting GPT technology in car rental processes can create a range of dilemmas, including:

  • Data privacy
  • Regulatory compliance
  • Infrastructure vulnerabilities
  • Legal entanglements
  • Fraud risks

For instance, the General Data Protection Regulation (GDPR) imposes strict requirements on handling personal data, including how it is collected, processed, and stored. Failing to comply with GDPR provisions can lead to significant legal and financial penalties. Car rental companies using GPT technology also may be subject to data breach notification requirements under various state and federal laws, such as the California Consumer Privacy Act (CCPA) and potentially the Health Insurance Portability and Accountability Act (HIPAA).

Adopting GPT technology can also increase the risk of fraudulent activities, such as identity theft and credit card fraud, which may lead to significant financial losses and reputational damage for car rental companies.

Car rental companies must adopt risk management strategies and implement robust security measures to safeguard against these potential threats while ensuring the responsible use of GPT technology. It is crucial to develop comprehensive policies and procedures to govern the use of GPT technology and ensure compliance with applicable legal and regulatory requirements.

It is also in the best interest of the industry to seek regulation and legislation regarding public-accessible use of AI and related tools, such as GPT.

Know the Risks

Before adding AI technologies, it’s vital for car rental companies to understand the technology involved, the risks of using this technology, and the negative outcomes tied to it.

Here are the top risks and liabilities rental car companies can face when using this technology.

  • Vehicle Accidents: Car rental companies must ensure the safety of their rental vehicles, including those that are AI-enabled (California Department of Motor Vehicles, 2023). If an AI-powered rental car causes an accident, the rental company may be held liable for any damages or injuries that occur. When an accident is caused by a malfunctioning AI system, the rental company may be held strictly liable, meaning they are responsible for damages regardless of fault. One example of this is the 2018 fatal accident involving an autonomous Uber vehicle in Arizona (Huang v. Uber Technologies Inc., 18-cv-01396 (N.D. Cal. Mar. 29, 2019). While Uber was not a car rental company, the incident highlights the potential liability risks that arise when AI systems cause accidents. See also Estate of Herzberg v. Rafaela Vasquez et al., 2:18-cv-00912 (D. Ariz. filed Mar. 5, 2019).
  • Data Privacy and Security: AI systems rely on data to function properly, which raises concerns about data privacy and security. Car rental companies must ensure that any data collected by AI systems is protected under relevant laws and regulations, such as the General Data Protection Regulation (GDPR) in the European Union. Failure to comply with these regulations can lead to significant fines and reputational damage.
  • Malfunctioning AI: AI systems can malfunction or fail, leading to potentially dangerous situations. Car rental companies have a duty to ensure their AI systems function properly and are regularly maintained. Failure to do so could make the company liable for any accidents or injuries that occur because of a malfunctioning AI system.
  • Regulatory Compliance: As AI use in transportation grows, new regulations may be introduced to govern its use. Car rental companies must stay up to date with any regulatory changes and ensure their AI systems comply with relevant laws and regulations. For example, in the United States, the National Highway Traffic Safety Administration (NHTSA) has issued guidance on the testing and deployment of autonomous vehicles, which includes rental cars.
  • Reputation Damage: If an AI-powered rental car is involved in an accident or malfunctions, it can damage the rental car company's reputation. This could lead to loss of business and negative publicity. Car rental companies have a duty to ensure their vehicles and AI systems are safe and reliable.
  • Customer Dissatisfaction: If AI systems do not function as expected, it could cause customer dissatisfaction. This could lead to negative reviews and loss of business. Car rental companies must ensure AI systems are user-friendly and meet customer expectations.
  • Increased Maintenance Costs: AI systems require regular maintenance and updates, which can be costly for car rental companies. Failing to maintain AI systems properly could lead to malfunctions or accidents. Car rental companies must ensure they have the resources to inspect and maintain AI systems .
  • Technical Expertise: Car rental companies need the technical expertise to implement and maintain AI systems. If the company lacks this expertise, it may need to hire additional staff or outsource the work, which can be expensive. Car rental companies must ensure they have the resources and expertise to implement and maintain their AI systems properly.  

The risks and liabilities before rental car agencies employing user-enabled AI technologies are great. One risk warranting greater consideration is cybersecurity. Part II in this article series will examine the cybersecurity risk of using AI technology and how rental car agencies can protect systems against breaches.

Carlos Bazan is a business strategist focused on operational and compliance topics in the car rental industry.