Declined loan emails and AI data leakage: what bad news to a client gives away in ChatGPT or Claude.

Telling clients that a lender has said no is the email brokers least want to write and the one they most want help wording. It carries the decline reason, what the enquiry did to their credit files, any mistake the broker made, and the plan to fix it. Brokers paste the draft into ChatGPT or Claude to get the tone right. This page marks every item in a routine declined application email that the National Consumer Credit Protection Act and the Privacy Act bear on, and shows how the same email is drafted on Ermos inside the brokerage.

The declined application email

Sent the day a lender declines. The outcome of the application is part of the record ASIC’s RG 273.165 expects a broker to keep, and where a refusal rests on credit report information the credit provider has its own notice duty under section 21P of the Privacy Act.

From: Anita Menon   To:
Tue 20 Oct 2026, 3.18pm   Subject: Tamarind has declined, and what we do next

Hi Daniel and Sophie,

I am sorry to tell you that Tamarind Bank rang me at 2.40pm to say it has declined .

Why.

My mistake.

Your credit files.

What now.

Call me tonight if you would like to talk.

An invented email. The lenders and the assessor are invented. Hover or tap any highlighted item for the analysis; the full list is below.

What leaves the brokerage

  1. 1
    The clients

    Named. Everything below is identifiable. Privacy Act guide.

  2. 2
    The declined application

    The loan amount, the property and the fact of a refusal. A household’s failed application, which they may not have told anyone about. Privacy Act guide.

  3. 3
    The reason and a named assessor

    The lender’s policy reason, a shortfall figure from its calculator and a named person at the lender. Financial detail about the clients and an internal view of the lender’s rules. Privacy Act guide.

  4. 4
    The broker’s admitted error

    A written admission that the broker did not check a lender’s policy before lodging. Evidence on any later complaint, and bearing on the duty in sections 158LA and 158LE.

  5. 5
    The credit enquiry

    That an enquiry was recorded on each client’s file and that another is coming. Credit information about two individuals, regulated by Part IIIA of the Privacy Act. Privacy Act guide.

  6. 6
    The section 21P statement

    A statement about when a credit provider must send a notice of refusal. It restates a rule in the Privacy Act and reveals nothing about the clients beyond the lender’s stated reason.

  7. 7
    The new plan and the surplus

    The next lender, the surplus and the card closure that widens it. The broker’s strategy and the household’s margin. Privacy Act guide.

  8. 8
    Broker and brokerage

    The sender, tied to the admission above.

What happens in Frontier Models (ChatGPT, Claude)

  • The whole document is transmitted to the provider’s servers. On personal plans the user cannot choose where it is stored or processed, and for the major providers that has generally meant outside Australia, under that country’s legal process. Some business plans offer storage in Australia, but the provider still receives the content.
  • On consumer tiers, prompts can be retained and used to train future models.
  • The provider’s staff and systems can reach the content under the provider’s own policies.
  • Once sent, the brokerage no longer controls it. Retention and deletion happen on the provider’s terms.

The same document on Ermos

Ermos Dominion

The document is drafted on a unit in your office, from your own templates and the client file. Every marked item stays on the unit, which keeps working with the internet switched off. Nothing in it is transmitted to an AI provider, so there is no disclosure to analyse: the confidentiality work is the same as for your file server.

Ermos Edge

Your documents, the index and your access boundaries stay on your own instance in an Australian data centre. When a staff member asks for this draft, only their question and the excerpts they are permitted to see go to a named Australian provider, who is contractually barred from keeping the content or training any model on it. Nothing is processed outside Australia.

Frontier Models (ChatGPT, Claude)Ermos EdgeErmos Dominion
Where the document is processedProvider servers, generally offshore on personal plansYour instance in an Australian data centre; answers generated in AustraliaThe unit in your office
Who can read itProvider staff and systems, under policyYour staff, within the boundaries you set. The named Australian provider processes only permitted excerpts, under contract, and keeps nothingYour staff only
Is it keptOn the provider’s termsKept on your instance; the provider is barred from retaining itStays on the unit
Can it train a modelOn consumer tiers, yesNo, by contractOnly your own unit learns from it, on your hardware

Part of AI data leakage in mortgage brokerages. See how this works in practice: Lender policy lookups on Ermos.

Common questions

Do ChatGPT and Claude use the information in a declined application email?
A pasted draft is sent to the AI company's servers and processed there to produce a reply. As at October 2026, whether a conversation on a personal plan (ChatGPT Free, Plus or Pro; Claude Free, Pro or Max) can be used to train the models depends on a setting each user controls. Business plans (ChatGPT Business and Enterprise, Claude Team and Enterprise) and the developer APIs sit under commercial terms, and OpenAI and Anthropic each say they do not train on that content by default (OpenAI, Anthropic). On either product, the thumbs up and thumbs down buttons can send a whole conversation back for training. The email records a failed application, a named assessor at the lender, a monthly shortfall figure and the broker's written admission of a mistake.
Is it safe to paste a declined application email into ChatGPT or Claude if we change the clients' names?
No, because the facts of the decline still point to one household. Removing names rarely makes a document anonymous. Information stays personal information while the person is reasonably identifiable, and the OAIC warns that information can be at risk of re-identification even when it has been de-identified or anonymised. The property, the $868,000 loan, the $212 monthly shortfall and the date of the refusal describe one application. The broker's written admission of error also sits in the email, and it could be evidence in a later complaint. The Office of the Australian Information Commissioner (OAIC) recommends in its guidance on commercially available AI products that organisations do not enter personal information, and particularly sensitive information, into publicly available generative AI tools, because of the significant and complex privacy risks.
Can ChatGPT or Claude be trusted to draft a declined application email?
Not without a check. Language models can produce fluent text with details that are not in the source, wrong figures, wrong dates or references that look real but are not. A qualified person should check every item against the file. In this email the reason for the decline, the $212 shortfall, the section 21P statement and the admission of error would do the most harm if wrong.
How can a mortgage brokerage use AI for a declined application email without sending it to ChatGPT or Claude?
Ermos is built so the document stays under your control. On the Dominion AI unit it is drafted inside your office and none of it is sent to an AI provider. On Ermos Edge your documents and index stay on your own instance in an Australian data centre, and only the question and the excerpts the user is permitted to see go to a named Australian provider that is contractually barred from keeping them or training any model on them. The email is drafted from the lender's decision on the client file and the brokerage's own template. The broker checks the reason and every figure, and signs it.
When must a lender send a notice of refusal?
Section 21P of the Privacy Act applies when a credit provider refuses an application for consumer credit and the refusal is based wholly or partly on credit eligibility information, where a credit reporting body disclosed the information for the application. The provider must then give the individual a written notice within a reasonable period, naming the credit reporting body. A refusal for policy reasons does not trigger it.
Does the outcome of an application need to be recorded?
ASIC's RG 273.165 lists the outcomes of credit applications among the records it expects a mortgage broker to keep, along with the information provided to the credit provider and relevant conversations. RG 273 is guidance rather than law. A declined application is part of the story the file must be able to tell later.
Should the broker put an error in writing to the client?
That is a decision for the broker and the licensee. An accurate account is consistent with the duty to act efficiently, honestly and fairly in section 47(1)(a), and a client who is told promptly can plan around it. Because the email may become evidence in a complaint, it is the licensee's document to settle, wherever it is drafted.

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