Executive Summary

On October 20, 2026, the New York City Department of Consumer and Worker Protection (DCWP) proposed rules regulating automated customer service systems, including AI-powered chatbots, traditional automated telephone systems, and rules-based chatbots. The proposal would require businesses to disclose at the outset that consumers are interacting with an automated system, provide specified means of accessing human assistance, maintain detailed compliance records, and avoid misleading representations about customer service availability. “Customer service” means assistance by a merchant to a consumer, in response to an inquiry from such consumer, regarding a product, service, account, refund, billing matter, complaint, cancellation request, fraud claim, or dispute in relation to the sale or purchase of a good or service. Businesses could not avoid responsibility for unlawful conduct by attributing it to technology.

The proposal could significantly affect banks, nonbank financial services companies, retailers, and other businesses serving New York City consumers. Its scope extends beyond generative AI to automated systems generally and may reach businesses outside the city that communicate with city residents. Questions remain regarding potential federal preemption for national and state-chartered banks.

A key provision would create a rebuttable presumption of deceptive and unconscionable trade practices when a business uses an automated system without providing a specified means of reaching a human representative. Businesses would need to offer a single-step transfer mechanism, such as a button, voice command, or menu selection, or, when no representative is available or the queue is unreasonably long, specified alternatives for obtaining human assistance. They also would need to preserve machine-readable records of covered interactions and related compliance information for at least three years. Repeated violations could result in penalties of up to $3,500.

The proposal has prompted debate over whether mandatory human access will improve consumer welfare or impose costs exceeding its benefits. Georgetown University Law Center Professor Adam Levitin questions whether human representatives will resolve consumers’ problems when constrained by scripts or lacking authority, and warns that compliance costs may increase prices. Business representatives similarly cite concerns about the proposal’s scope, uncertainty over adequate customer service, and compliance and litigation risks.

Consumer advocates and former regulators support the proposal as a safeguard against automated systems that trap consumers in repetitive exchanges, provide inaccurate information, or impede refunds, billing corrections, cancellations, and dispute resolution. They emphasize that businesses should remain accountable for the consequences of deploying automated technology.

The proposal also presents significant private-litigation risks. If New York City enacts the proposed POWERS Act in its current form, consumers and certain nonprofit organizations could bring individual, class action, and private attorney general lawsuits based on applicable consumer-protection requirements. Because the bill covers certain “unlawful” practices, violations of a final DCWP rule could potentially support private claims, subject to the legislation’s final language and other legal requirements. Remedies could include actual damages and statutory penalties of up to $2,500 per violation.

Businesses should evaluate their automated systems, disclosures, human-escalation procedures, customer service representations, vendor arrangements, and recordkeeping capabilities. They should also consider submitting comments seeking clarity on the proposal’s scope, standards for reasonable and timely service, operation of the rebuttable presumption, and proportionality of the compliance obligations.

DCWP has scheduled a public hearing for November 19, 2026, at 11:00 a.m., with written comments due that day. Although the proposal is not final and specifies no effective date, Commissioner Sam Levine’s October 21 New York Times opinion piece suggests that the Department may move quickly, potentially before the holiday shopping season. Businesses should monitor the rulemaking process and prepare for expedited implementation.

Although Section 1026.10(e) of Regulation Z prohibits a creditor from imposing a fee for making payments by any payment method unless the payment method involves an expedited service by a live customer service representative, to our knowledge, the proposal could be the first law of its kind nationwide. Rather than prohibiting automation, it would condition its use on transparency, meaningful human access, and demonstrable compliance, potentially establishing a model for other jurisdictions regulating AI and automated consumer interactions.

For a detailed description and analysis of this proposed rule, please click HERE.