Citing New Research from Protect Borrowers and Columbia Law School’s Center for Law and the Economy, New York City Department of Consumer and Worker Protection Moves to Ban Doom Loops, Other Abuses
October 20, 2026 | NEW YORK, NY — Today, the New York City Department of Consumer and Worker Protection (DCWP) proposed a first-in-the-nation ban on common abuses by AI chatbots. As companies across New York City embrace AI to replace human customer service workers, DCWP aims to prohibit common tactics that can deny service to New Yorkers, “putting an end to customer service ‘doom loops’ that cause New Yorkers wasted time, prolonged consumer disputes, and financial harm.”
“Bad customer service can violate consumer protection law, no matter the technology used to deliver it,” said Adam Teitelbaum, Senior Fellow at Protect Borrowers. “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.”
New York City’s AI Chatbot rule builds on a framework published last week by Protect Borrowers and the Columbia Law School’s Center for Law and the Economy, authored by Stephanie T. Nguyen, former chief technologist at the Federal Trade Commission, and Adam Teitelbaum, former director of the Office of Consumer Protection at the D.C. Attorney General’s office.
“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 and the Economy. “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.”
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 by Nguyen and Teitelbaum finds no reason an AI agent should be treated differently.
Background on AI chatbots
Today’s press release issued by DCWP announcing this new rule is available here:
https://www.nyc.gov/site/dca/news/072-26/mamdani-administration-proposes-ban-ai-customer-service-doom-loops
An Op-Ed by DCWP Commissioner Sam Levine announcing this action is available here:
https://www.nytimes.com/2026/10/20/opinion/mamdani-ai-rule-customer-service-doom-loop.html
The issue brief, Legal Risk Posed by AI Chatbots: Unfair and Deceptive Practices and Other Authorities, published by the Center for Law and the Economy and Protect Borrowers, is available here:
https://law-and-economy.law.columbia.edu/content/legal-risks-posed-ai-chatbots-unfair-and-deceptive-practices-and-other-authorities
An article by Nguyen and Teitelbaum, The New Gatekeepers: How AI Chat Interfaces Block People From Their Banks, Insurers, and Student Loan Servicers, published in Harvard Law School’s Journal on the Law and Technology (JOLT) online publication JOLT Digest here:
https://jolt.law.harvard.edu/digest/the-new-gatekeepers-how-ai-chatbots-block-people-from-their-banks-insurers-and-student-loan-servicers
More on the history of corporations’ misuse of poor customer service to cheat people by Nguyen and Teitelbaum, Deflection & Doom Loops: The Hollowing Out of Customer Service, published jointly by Nguyen’s substack, Division of Field Notes, and Protect Borrowers’ substack, IN DEBT:
https://divfn.substack.com/p/deflection-and-doom-loops-the-hollowing
Further Reading
Today’s announcement follows a wave of actions by New York City to protect consumers, workers, and small businesses. Two weeks ago, New York Mayor Zohran Mamdani announced the POWER Act, his first major piece of legislation in the New York City Council. The bill, which is sponsored by Chair of the Committee on Consumer and Worker Protection Harvey Epstein, puts enforcement over abusive and unfair business practices in the hands of the people being cheated.
Substack by Winston Berkman-Breen and Mike Pierce of Protect Borrowers on the introduction of the POWER Act: Law Enforcement, Democracy, and America’s Mayor
NYC coalition advisory for a pro-POWER Act rally: Consumers, Workers, Tenants, and Small Businesses Rally at City Hall in Support of POWER Act
Protect Borrowers and The Century Foundation ‘Affordable NYC Now’ compendium: https://protectborrowers.org/resource/affordable-nyc-now/
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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.
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.
