After the interview is done and the answer is a solid NO, as a company we have NO BUSINESS RELATIONSHIP with you. Any iota of effort we put towards you is essentially wasted effort, even if very minor.
What changes that discussion further is that there is a small, but still quite real, possibility of lawsuit, social media rant (as another comment mentioned), or even a disgruntled applicant shooting up the place.
(I believe Pres. William McKinley was shot by a disgruntled would-be bureaucrat who didn't get a job...)
A perfunctory if generic rejection is a safer choice. Short-list candidates who made it to a 3rd interview, or folks who we reached out and headhunted (but didn't choose) may be a different story, but those are rare edge cases.