DoNotPay must pay $193,000 to settle false claim charges from FTC.
DoNotPay, a company that claimed to offer the “world’s first robot lawyer,” has agreed to a $193,000 settlement with the Federal Trade Commission, the agency announced on Tuesday. The move is a part of Operation AI Comply, a new law enforcement effort from the FTC to crack down on companies that use AI services to deceive or defraud customers.
According to the FTC complaint, DoNotPay said it would “replace the $200-billion-dollar legal industry with artificial intelligence” and that its “robot lawyers” could substitute for the expertise and output of a human lawyer in generating legal documents. However, the FTC says the company made the claim without any testing to back it up. In fact, the complaint says:
None of the Service’s technologies has been trained on a comprehensive and current corpus of federal and state laws, regulations, and judicial decisions or on the application of those laws to fact patterns. DoNotPay employees have not tested the quality and accuracy of the legal documents and advice generated by most of the Service’s law-related features. DoNotPay has not employed attorneys and has not retained attorneys, let alone attorneys with the relevant legal expertise, to test the quality and accuracy of the Service’s law-related features.
The complaint also alleges the company even told consumers they could use the company’s AI service to sue for assault without hiring a human and that it could check small business websites for legal violations based on a consumer’s email address alone. DoNotPay claimed this would save businesses $125,000 in legal fees, but the FTC says the service was not effective.
The FTC says that DoNotPay has agreed to pay $193,000 to settle the charges against it and to warn consumers who subscribed between 2021 and 2023 about the limitations of its law-related offerings. DoNotPay will also not be allowed to claim it can replace any professional service without providing evidence.
The FTC also announced action against other companies that have used AI services to mislead customers. That includes AI “writing assistant” service Rytr, a company the FTC says provides subscribers with tools to create AI-generated fake reviews. The move against Rytr comes a little over a month after the FTC Federal Trade Commission announced a final rule banning all companies from creating or selling fake reviews, including AI-generated ones. It will soon go into effect, which means the FTC can seek a maximum of up to $51,744 per violation against companies.
The FTC also filed a lawsuit against Ascend Ecom, which allegedly defrauded consumers of at least $25 million. Ascend promised customers that by using its AI-powered tools, they could start online stores on e-commerce platforms like Amazon that’d produce a five-figure monthly income.
“Using AI tools to trick, mislead, or defraud people is illegal,” said FTC Chair Lina M. Khan. “The FTC’s enforcement actions make clear that there is no AI exemption from the laws on the books. By cracking down on unfair or deceptive practices in these markets, FTC is ensuring that honest businesses and innovators can get a fair shot and consumers are being protected.”
