New York City wants to force companies to inform consumers when they interact with artificial intelligence and other computerized systems, as part of a proposal to reduce customer service “doom loops.”
The city’s Department of Consumer and Worker Protection unveiled a proposal Tuesday covering all automated systems — including rules-based chatbots and AI — that handle customer service calls. This would also require a one-touch option to connect customers to a human representative.
Automated customer service has long been a feature of modern life, often leading to consumer complaints about “Kafkaesque” misunderstanding loops and failed attempts to get help, DCWP Commissioner Samuel AA Levine said Tuesday on a call with reporters.
“Our concern in New York is that AI will only make the situation worse,” he said.
States like California and New Jersey have laws requiring businesses to notify their customers when they are dealing with an automated system. New York City’s proposal goes further and should serve as a model for other jurisdictions, Levine said.
New York City’s proposal comes as the Trump administration boosts the AI industry and federal lawmakers sit on their hands, Levine said.
“We are not waiting for Washington to come to the rescue of workers,” he said.
Tuesday’s proposed rule would not cover businesses subject to exclusive federal jurisdiction, such as airlines and national banks. But it would apply to other industries that do business with New York City’s more than 8 million residents.
The proposal aims to hold companies responsible if an AI customer service bot provides misleading or incorrect information. Companies that promise customer service but fail to provide meaningful assistance would also face penalties.
Companies would face claims under the “broken promise of customer service” provision if their automated systems directed consumers to menus that “fail to adequately respond to those consumers’ requests” or provide “insensitive, irrelevant, or erroneous information,” according to the proposal.
“Whether you’re trying to resolve an issue with your bank, get a refund, or return a package, you deserve access to real help,” Mayor Zohran Mamdani (D) said in a statement. “This rule is clear: Reducing customer service costs cannot come at the expense of New Yorkers. »
The proposal, if it goes into effect as written, leaves many open questions and could result in significant costs for businesses, said Steven Fulop, president and CEO of Partnership for New York City, a nonprofit business advocacy group.
“My question would be: How do you decide whether a chatbot actually solves a problem or not,” he said in a phone interview.
Without a firm definition of what constitutes a failure to provide customer service, businesses face an increased risk of litigation that could exacerbate the affordability crisis, Fulop said.
“Mamdani’s time”
The proposal has a 30-day comment period and the DCWP is scheduled to hold a hearing on November 19.
The city is seeking to move forward “on Mamdani time” to end the rule, Levine said, citing the roughly six months it took DCWP to finalize its historic click-to-cancel rule earlier this year.
“I have found, over many years of privacy enforcement, that companies are perfectly capable of providing a set of protections in California and a set of protections in Oregon,” said Levine, former head of consumer protection efforts at the Federal Trade Commission.
Businesses that violate the city’s rule would face potential compensation for harmed consumers and civil penalties starting at $525 per violation, according to the proposal.
While DCWP plans to hire more investigators to monitor the chatbot proposal once it takes effect, customer complaints will be the main driver of the agency’s actions, Levine said.
“New Yorkers are our eyes and ears,” he said. “The way the vast majority of our regulations and lawsuits begin is with a consumer filing a complaint.”
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