Key takeaways
- New York City’s Department of Consumer and Worker Protection has proposed rules that would make it a deceptive trade practice to use an automated customer service system, such as an AI chatbot or a phone menu, without clearly telling consumers at the start that they are not dealing with a human representative. Comments are due December 18, 2026.
- A merchant that says it offers customer service could not repeatedly and unreasonably loop consumers through unhelpful menus or give them unresponsive, irrelevant, or erroneous answers. A merchant using an automated system would be presumed to violate this standard unless it offers a one-step transfer to a human representative or, if none is available, another way to reach one.
- Merchants would have to keep compliance records for at least three years and could not defend a violation by blaming the technology involved. Proposed penalties start at $525 for a first violation, with no cure period.
- Unlike California’s new customer service chatbot law, the proposal has no revenue threshold and would require disclosure in every automated interaction, including automated phone menus.
New York City’s Department of Consumer and Worker Protection (DCWP) is accepting written comments on its proposed rules regarding automated customer service systems until December 18, 2026. The rules would govern how merchants use chatbots, phone menus, and other automated tools to answer consumers’ questions. They would also presume a violation where a merchant offers no way to reach a human representative.
DCWP describes the proposal as a response to customer service “doom loops” and says that, upon adoption, New York City would become “the first municipality in the nation with the ability to enforce this type of consumer protection.” In this Legal Development, we highlight some key features of the proposal.
What would the proposed rules cover?
The rules would apply to an “automated customer service system,” defined as “any technology used to provide consumers with customer service where all or substantially all the communication to the consumer is made by such technology rather than by a natural person.” The definition is not limited to AI: DCWP’s explanation of the proposal discusses phone menus and rules-based chatbots, as well as large language models. “Customer service” means a merchant’s assistance in response to a consumer’s inquiry regarding a product, service, account, refund, billing matter, complaint, cancellation request, fraud claim, or dispute. The proposal sets no revenue or size threshold, and it does not separately address merchants located outside the city.
What would merchants have to do?
The proposal includes the following requirements:
- Disclosure at the outset: A merchant would have to disclose clearly and conspicuously, at the beginning of each interaction and in the language being used, that the consumer is interacting with an automated system and not a human representative.
- Reasonable and timely customer service: It would be deceptive and unconscionable to represent that customer service is available and then fail to provide it in a reasonable and timely manner. A merchant would fall short if, during an automated interaction, it repeatedly and unreasonably directs the consumer to menus that fail to adequately address the inquiry or responds with unresponsive, irrelevant, or erroneous information.
- Access to a human: A merchant using an automated customer service system would face a rebuttable presumption that it violated that standard unless it offers a way to reach a human representative. The main option is a “single-step transfer mechanism,” such as “Press 0” or “Say or type ‘agent,’” usable at any point in the interaction, together with the estimated wait time if the consumer is queued. If no human representative is available or the queue is unreasonably long, the merchant could instead offer an alternative. The qualifying options include a phone number or live chat with its hours or a callback, contact form, text number, or email address with a stated response time.
- Accurate contact channels: It would be deceptive to represent that customer service is available through a channel, such as telephone or email, that the merchant does not use for customer service.
- Recordkeeping: Merchants would have to keep compliance records for at least three years in machine-readable form and produce them on request. Required records would include contracts and licenses for each system, logs of every automated interaction showing its length and whether a transfer was offered and used, annual data on resolutions and transfers, and the disclosures used.
The proposal would also provide that, under any of DCWP’s rules and the laws it enforces, it is no defense that a technology made the claim, omitted the information, or carried out or assisted the violation.
Enforcement
DCWP would enforce the rules under New York City’s Consumer Protection Law, which provides for civil penalties and restitution to affected consumers. The proposed penalty schedule sets the penalty for each violation at $525 for a first violation, $1,050 for a second, and $3,500 for a third or subsequent violation of the same provision within two years. Under the law, a knowing violation carries $3,500 even the first time. Violations can add up quickly: Each provision charged counts separately, and the law treats each deceptive representation or omission as a distinct violation. The proposal provides no opportunity to fix a violation before penalties apply. It would not create a private right of action.
Looking ahead
Merchants that deal with New York City consumers through chatbots or phone menus should assess whether the proposal could reach them, including by reviewing their opening disclosures, transfer options and wait-time messages, and the interaction data their vendors retain. They should also consider whether to comment by December 18. The New York City rules could change after the comment period, and DCWP has not set an effective date. More broadly, the proposal is one of several recent measures regulating how businesses use chatbots with their customers, including California’s Assembly Bill 1609, discussed in our prior Legal Development on chatbot rules. Businesses that rely on chatbots for customer service will need to keep a close eye on this area as requirements continue to evolve.
