A New Brief Urges State Enforcers and Private Plaintiffs to Use Existing Law Against Chatbots That Give Wrong Answers, Trap Customers in “Doom Loops,” or Fail to Fix Problems.

October 13, 2026 | NEW YORK, NY — Companies are replacing human customer service workers with AI chatbots, and many of the ways they do it may already be illegal, according to a new joint issue brief from Columbia Law School’s Center for Law and the Economy and Protect Borrowers. The authors, Stephanie T. Nguyen, former chief technologist of the Federal Trade Commission, and Adam Teitelbaum, former director of the Office of Consumer Protection at the D.C. Attorney General’s office, argue that enforcers do not need to wait for Congress to protect families and honest businesses. The laws on the books already reach these practices.

Tenants, borrowers, insurance policyholders, and fraud victims now often have to get past a chatbot to get help with matters that can upend their lives. When that chatbot gives a wrong answer, blocks the way to a human, or cannot solve the problem, the company that deployed it is on the hook. Companies are liable for the conduct of their agents, and the brief finds no reason an AI agent should be treated differently.

“Companies are testing unproven chatbots on tenants, borrowers, and fraud victims in real time, and those customers are paying for the mistakes,” said Stephanie Nguyen, Senior Fellow at Columbia Law School’s Center for Law and the Economy. “When companies hand critical customer service channels to untested and defunct products, they, not tenants, borrowers, or consumers, should bear the cost and legal liability of the errors.”

The brief sorts the problem into three practices that may violate state and federal consumer protection laws:

  • Wrong: false information. Chatbots routinely give customers false or misleading answers. Every state and D.C. bans unfair and deceptive practices, and federal laws on debt collection, credit, and mortgage servicing add further duties.
    • When Air Canada’s chatbot told a grieving customer he could claim a bereavement fare after the fact, a Canadian tribunal rejected the airline’s claim that the chatbot was a separate entity responsible for its own words.
  • Blocked: obstructing access. Doom loops that keep customers from canceling a service or reaching a person echo tactics enforcers have punished before.
    • The FTC acted against H&R Block for making downgrades hard and upgrades easy. The CFPB sued Comerica Bank for cutting off nearly 25 million customer service calls.
  • Broken: inadequate service. A system that cannot solve the problems it exists to solve is a textbook unfair practice.
    • The Department of Transportation fined Southwest Airlines a record $140 million after stranded travelers met busy signals, hours-long queues, and dropped calls during the airline’s 2022 holiday meltdown.

With federal agencies pulling back from enforcement, the brief urges state attorneys general, state banking regulators, and private plaintiffs to fill the gap. State attorneys general hold broad subpoena power, and state bank examiners can demand records from the institutions they supervise.

“State attorneys general are consistently on the front lines in protecting consumers from the harms posed by emerging technologies, and–especially given the entrenchment in federal enforcement–AI-driven chatbots should be no exception,” 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, “They already have the investigative tools to look under the hood of these systems, and the legal authority to hold companies accountable when their chatbots fail consumers.”

The brief recommends that:

  • Law enforcement officials at every level of government police firms deploying AI chatbots to ensure customers and workers are treated fairly.
  • Businesses audit their chatbots now for false answers, doom loops, and unresolved problems, and document that testing.
  • Policymakers require a single, clearly visible click to reach a human within a reasonable time, paired with public reporting on how often companies actually resolve complaints.
  • States bar companies from blaming the machine, following a new California law that forbids defendants from arguing that AI “autonomously caused the harm.”
  • Legislatures fund state attorneys general to hire more investigators and technologists.
  • Agencies publish the consumer complaints they receive so regulators, the press, and the public can spot trouble early.

Read the full issue brief, Legal Risk Posed by AI Chatbots: Unfair and Deceptive Practices and Other Authorities, here.

Today, Nguyen and Teitelbaum also published an article in Harvard Law School’s Journal on the Law and Technology (JOLT) online publication JOLT Digest, here.

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About the Authors

Stephanie T. Nguyen is a senior fellow at the Center for Law and the Economy. She previously served as chief technologist at the Federal Trade Commission under Chair Lina Khan, where she founded and led the agency’s first Office of Technology. She writes The Division of Field Notes.

Adam Teitelbaum is a senior fellow at Protect Borrowers. He previously served as director of the Office of Consumer Protection at the Office of the Attorney General for the District of Columbia.

About the Center for Law and the Economy

The Center for Law and the Economy at Columbia Law School, led by Professors Lina Khan and Lev Menand, is dedicated to advancing the study, practice, and implementation of the laws and policies that structure the U.S. economy. The center’s work spans antitrust, administrative law, banking law, consumer protection, corporate governance, financial regulation, tech policy, healthcare policy, and more. Learn more at law-and-economy.law.columbia.edu.

About Protect Borrowers

Protect Borrowers (formerly Student Borrower Protection Center) is a nonprofit organization led by a team of experts, lawyers, and advocates fighting to build an economy where debt doesn’t limit opportunity. We investigate financial abuses, take predatory companies to court, and push for policies to protect working people from debt traps. We aim to deliver immediate relief to families while building power, driving systemic change, and fighting for racial and economic justice.

Learn more at protectborrowers.org or follow us on social @BorrowerJustice.