The rapid acceleration of AI over the past few years has wide-ranging impacts on the work we do. In dealing with Personal Guarantees (‘PGs’) relating to limited company debt, not only are we beginning to see communications from personal guarantee creditors and debt collectors being written by AI, but we are also seeing individual directors and guarantors turn to AI chatbots for debt management and negotiation support.
However, when it comes to Personal Guarantees, the current AI offerings are simply not fit for purpose. While the current AI technology may have some value to offer to regulated and general debt collection practices, PGs occupy a unique liminal space, where they are essentially a separate contract or deed from the original debt to which they relate.
We are seeing far too many enquiries where individuals have already dug themselves into a hole with AI generated emails advancing arguments entirely reliant on PG-exempt regulations, expired legal precedents, and (often) faulty reasoning. Such reasoning often relies upon consumer credit act (‘CCA’) and broader FCA regulations that simply do not apply to Personal Guarantees of limited company debt. Even if there is a genuine prospect of contention or valid dispute, this too often gets buried or discredited along with all of the other AI-generated irrelevant arguments.
This impact is not limited to individuals setting out to use AI programs like ChatGPT or Copilot. With search engines like Google pushing generative AI overviews on common searches, out-dated and inapplicable information is circulating at a noticeably higher rate.
The creditors (and debt management companies acting on their behalf) who have sought to use AI material to put forward stronger arguments are also frequently finding themselves being discredited in the same way. It is newsworthy that courts have identified this trend and caught out numerous parties, including Solicitors in some instances, using AI to put cases together that do not stand up to human scrutiny. Courts are alert to this issue and prepared to throw cases out entirely in many instances.
Dealing with PG issues effectively requires a holistic approach. It pays to know how the creditor you are dealing with acts, if there are any repeated flaws in their processes, documentations or systems, and – crucially -which issues have mileage and which do not. And all of this needs to be considered carefully together with a realistic view of the possible outcomes given your particular circumstances and aims.
If you are being pursued by under any alleged personal guarantees, please contact us HERE for tailored support.
