PromptShield: Protecting User Privacy in AI Chatbots

Artificial Intelligence Chatbots based on Large Language Models are becoming important cornerstones in education, professional, and personal contexts. Users frequently disclose sensitive information without the necessary awareness of how their data is processed, stored, and later used, creating risks of unintended exposure and violation of data protection regulations such as GDPR and the EU AI Act. In this paper, we present a dynamic privacy-by-design framework that introduces a novel privacy-oriented middleware layer between the users and the AI Chatbots. Our framework intercepts user prompts, detects and sanitizes sensitive information, and enables explicit user control over data retention and disclosure through our dedicated Information Manager Dashboard. To develop our framework around real-world needs, we conducted a survey with 83 participants investigating privacy concerns, regulatory awareness, and preferences for transparency and control in conversational AI. Our results indicate that better and more transparent privacy safeguards can be achieved without significantly compromising usability or performance, supporting the development of trustworthy and user-centric AI chatbots. We also evaluate our solution against other state-of-the-art implementations and relevant metrics.