It’s almost impossible to go a single day without hearing about artificial intelligence (AI). From headlines to heated debates, AI is having its “internet moment.” When I tell my kids that I grew up in a world without the internet, they look at me like I grew up during the Flintstones era. One day, their kids might respond the same way when they hear, “There was a time before AI?!”
But while society grapples with the promise and perils of AI, industries—including private lending—are being forced to make a decision: adopt AI or fall behind.
In the legal world, AI is under scrutiny. Some judges are openly frustrated with attorneys who cite “hallucinated” AI-generated cases—fictional case law spit out by chatbots and presented in court as if real. Judges in various states have been forced to change decisions because of attorneys citing cases that don’t exist, which had been relied upon. This has rightly caused concern and sparked calls for AI regulation in law.
In California, courts that don’t prohibit the use of generative AI must adopt new policies in accordance with the California Rules of Court rule 10.430, effective September 1, 2025.
Lawyers and lenders who don’t use AI, responsibly, of course, are doing a disservice to their clients, their businesses, and themselves. That’s like still relying solely on printed casebooks when digital legal research tools exist—or making underwriting decisions based on gut instinct alone.
So what does this mean for you as a private lender?
If you’re not already using AI to streamline operations, assess borrower risk, automate compliance reviews, or monitor real-time fraud indicators, you’re missing out on tools that can significantly increase efficiency, reduce cost, and minimize risk. From client onboarding to credit analysis, AI can be a powerful partner when used with care and oversight.
Of course, just like in school when writing a research paper, sources must be verified. AI is only as smart and ethical as the humans who use it. But that’s no reason to ignore the technology altogether.
Instead, private lenders should:
- Vet AI tools for accuracy, transparency, and reliability.
- Incorporate human review at key decision points.
- Use AI to complement—not replace—judgment and experience.
- Stay informed about new regulations and ethical standards surrounding AI in finance.
Yes, it may feel intimidating to adopt new technology. But avoiding AI out of fear or inertia could cost your business far more in the long run.
Embrace the learning curve—you might even enjoy it.
At Geraci LLP, we help private lenders stay ahead of industry trends, legal developments, and emerging technologies like AI. Want to make sure your lending practices are not only compliant but also future-proof? Contact our team today.
