Mamdani Administration Proposes Ban on AI Customer Service Doom Loops

October 20, 2026

First-in-the-Nation Municipal Protections Would Ensure Access to a Human Agent and Accountability for Wasted Time and Money

NEW YORK, NY – Today, the New York City Department of Consumer and Worker Protection (DCWP) and Commissioner Samuel A.A. Levine proposed landmark reforms to ensure New Yorkers are not cheated of their time or money by shoddy automated customer service technologies, including AI chatbots. The rule requires businesses to provide timely and reasonable customer service and offer customers easy access to a human representative if that service falls short. When finalized, it would put an end to customer service “doom loops” that cause New Yorkers wasted time, prolonged consumer disputes, and financial harm.

Following the rule’s proposal on October 20, 2026, New Yorkers have 30 days for public comment. Upon adoption, New York would become the first municipality in the nation with the ability to enforce this type of consumer protection. The rule builds off DCWP’s historic regulations banning subscription traps, which took effect earlier this year.

“When corporations force you to fight your way through an endless doom loop of AI-generated responses to speak to another human being, they’re stealing your time, money, and patience. Whether you’re trying to resolve a problem with your bank, get a refund or return a package, you deserve access to real help,” said Mayor Zohran Mamdani. “This rule makes clear: customer service cost-cutting can’t come at New Yorkers’ expense.”

“Working people deserve customer service that actually delivers, not an endless barrage of automated chats, calls, and responses. The rule we’re proposing today is common sense and puts people first—requiring easy access to real human help and holding corporations accountable. This administration is fighting relentlessly to deliver a city we can afford, and we looking forward to hearing from New Yorkers during the public comment period,” said Deputy Mayor for Economic Justice Julie Su.

“Sometimes bad customer service is merely exasperating. Other times it’s all the difference between refilling a critical prescription, rehabilitating a student loan, or recovering a large refund. That’s why New York City is drawing a line against automated doom loops—proposing rules to ensure consumers have access to the meaningful customer service they expect,” said DCWP Commissioner Samuel A.A. Levine. “We are not waiting for Washington to come to the rescue of working people.”

“Customer service has been steadily hollowed out for decades, and AI chatbots further threaten to accelerate that decline. Chatbots can create the illusion of help while trapping consumers in endless doom loops of wrong answers and unresolved problems,” said Stephanie T. Nguyen, Senior Fellow at Columbia Law School's Center for Law & the Economy and former FTC Chief Technologist. “New York City's proposed rules make corporations liable for AI when it breaks the law and sends a simple message: customer service must meaningfully serve customers.”

“Bad customer service can violate consumer protection law, no matter the technology used to deliver it,” said Adam Teitelbaum, Senior Fellow at Protect Borrowers and former director of the Office of Consumer Protection at the D.C. Attorney General’s office. “New York City’s proposed rules put industry on notice that when companies offload customer service to AI, they are responsible for the consequences—while giving enforcers a clear framework and the tools to hold violators accountable. Other states and cities should follow.”

Proposed Chatbot Rule

DCWP’s proposed rule would codify that it is a deceptive and unconscionable trade practice for businesses to insinuate that customer service is available, only to repeatedly and unreasonably fail to address consumers’ inquiries, or to only respond to consumers’ inquiries with unresponsive, irrelevant, or erroneous information.

Specifically, the rule would:

Require businesses to disclose when a customer is talking to an automated customer service system such as AI;
Require businesses to provide an easy offramp to speak to a human representative;
Prohibit businesses from evading responsibility for using AI that results in unlawful conduct;
Require businesses to actually offer meaningful customer assistance if it is advertised.

“Automated customer service systems” often appear as AI customer service chatbots but can also include voice response systems on the telephone. While the use of artificial intelligence in customer service has accelerated in recent years, consumer satisfaction has not. Time and time again, research shows that these technologies fail to provide customer services. According to a report from Gartner—an information services advisory firm—chatbots’ ability to resolve customer service issues range from a low of 17% regarding billing disputes, to a high of 58% for returns or cancellations.

The proposed rule would give DCWP citywide enforcement ability over businesses who use automated customer service systems. Violators would be liable for restitution to harmed consumers and civil penalties, with fines starting at $525.

DCWP proposed this rule by publishing it in the City Record on October 20, 2026. Following the proposal, under the City Administrative Procedures Act (CAPA), stakeholders have a 30-day comment period, including a public hearing, in which to provide DCWP feedback and comments on the proposed rule. After the comment period, DCWP will review all submissions before the rule is finalized and adopted.

Enforcement Against Deceptive AI Tools

DCWP enforces the New York City Consumer Protection Law, which prohibits unfair trade practices in the sale of consumer goods and services, including false advertising, phony sales, and special offers with hidden conditions.

As outlined in a joint policy statement issued in September, this includes representations made by chatbots and other agentic systems and the design, marketing, sale, or deployment of AI-enabled products and services.

Earlier this year, DCWP proposed a junk fee rule requiring businesses to advertise the total price for any good or service upfront, including all mandatory additional charges and fees. This follows Mayor Mamdani’s Executive Order 9, directing the agency to take action against hidden junk fees citywide, and builds upon the agency’s rule banning hidden hotel fees.

DCWP is the nation’s leading municipal enforcement agency charged with delivering economic justice. We bring New Yorkers real economic relief and protect them from predatory, deceptive, and unfair practices that violate their rights as consumers and workers. This includes pioneering cutting-edge protections for New Yorkers, such as the City’s Consumer Protection Law, Protected Time Off Law, Fair Workweek Law, and Delivery Worker Laws. Across New York City, DCWP levels the economic playing field by licensing more than 45,000 businesses in over 45 industries, and providing essential services including free tax preparation and financial counseling to ensure New Yorkers keep more of what they earn and can plan for their futures. This work ensures that New York City is a fairer, more affordable place to live for all. For more information about DCWP and its work, visit DCWP at nyc.gov/dcwp or follow on X, Facebook, Instagram, TikTok, and YouTube.

Media Contact:
Milo Fink Gringlas
Department of Consumer and Worker Protection 
(646) 772-0331
press@dcwp.nyc.gov