In May 2025, New York State passed its Fiscal Year 2025-26 Budget, ushering in a sweeping set of consumer protection reforms. Tucked into the budget were new laws designed to protect consumers in an increasingly digital and data-driven marketplace. These measures include laws targeting AI chatbots, algorithmic pricing based on personal data (sometimes called “surveillance pricing”), return and refund policies for retailers, and subscription cancellation practices. Together, they represent one of the most comprehensive efforts by any state to strengthen consumer rights—and they’re poised to significantly impact businesses that interact with New York consumers.

AI Companions

The New York General Business Law was amended by adding a new article targeting AI systems designed to simulate intimate, sustained relationships with users—so-called “AI companions.”

The law applies to AI systems that go beyond simple customer service chatbots. It focuses on AI companions—tools that use machine learning, personalization, and sometimes emotional recognition to simulate human-like relationships. These companions remember users, initiate emotional conversations, and sustain dialogue that can feel deeply personal, including romantic or platonic themes. 

Importantly, the law does not apply to bots strictly limited to business purposes (e.g., helping you order sneakers or check your bank balance), research tools, or internal workplace systems.

Under the law, operators—any business or person offering an AI companion to the public in New York—must comply with the following:

• Have any AI companion disclose at the start of each interaction—and again at least once every three hours for prolonged conversations—that the user is not talking to a real person. This disclosure must be easy to understand, and either spoken or written, depending on the interface.
• Ensure any AI companion includes protocols to detect and respond to signs of suicidal ideation or self-harm. When concerning language is detected, the bot must refer the user to resources like the 988 crisis line or other qualified mental health services.

The New York Attorney General has authority to enforce the law. Violations could result in civil penalties of up to $15,000 per day. Penalty payments will go directly into a newly established Suicide Prevention Fund, which will support mental health awareness and crisis intervention efforts statewide.

The law is set to take effect on November 5, 2025.  

Transparency in Algorithmic Pricing

The addition of Section 349-a to the General Business Law may have a significant impact on how businesses display prices when algorithms and personal data are involved.

The law covers any business operating in New York that uses what’s called personalized algorithmic pricing—essentially, using an algorithm to personalize prices based on personal data. The law defines “algorithm” broadly to include any computational process that applies a set of rules. “Personal data” is also defined broadly to include any information that identifies, relates to, describes, or could reasonably be associated with or linked to a particular consumer or their device—including names, email addresses, device IDs, purchase history, and browsing behavior. However, the definition specifically excludes trip-based fare calculations for ride-hailing services.

If you fall under the law, you must include the phrase, “THIS PRICE WAS SET BY AN ALGORITHM USING YOUR PERSONAL DATA” in the same place and format as the price itself (online, in an app, in-store, etc.), and position it clearly and conspicuously next to the price—not buried in a footnote or hidden behind a link. The disclosure must appear at the same time as the price is displayed and be written in a manner that is easily readable and understandable to the average consumer.

Some industries are exempt—specifically, insurance companies, financial institutions covered under federal or New York financial laws, and businesses offering discounts under pre-existing subscription contracts.

The New York Attorney General is the primary enforcer and may issue a warning and provide an opportunity for businesses to cure violations. If noncompliance continues, the AG may pursue legal action—even without demonstrating consumer harm. Each violation may result in civil penalties of up to $1,000. Importantly, the law does not preclude additional civil or criminal liability under other statutes, potentially exposing businesses to broader enforcement.

These requirements take effect on July 8, 2025.

Standardized Return and Refund Policies

New York also expanded its long-standing refund policy disclosure requirements to apply equally to both physical retail stores and online retailers. These changes amend General Business Law Sections 217 and 218-a. The law applies to retail mercantile establishments (brick-and-mortar stores), and online retailers that sell new merchandise for personal, family, or household use through websites, apps, or other digital platforms. Importantly, online marketplaces (like eBay or Amazon Marketplace) are excluded if they act purely as platforms and not as the actual seller.

All covered businesses must conspicuously post their refund policies. For in-store retailers, the policy must appear:

• On or near the item,
• At the cash register,
• At store entrances, or
• In another clearly visible location.

For online retailers, the policy must be:

• Displayed near the item (such as in the product listing), or
• Made available by hyperlink before the consumer enters billing information.

The refund policy must clearly state:

• Whether refunds are offered at all.
• The conditions under which refunds are allowed, including:
  • Whether sale or “as is” items qualify,
  • If proof of purchase is required,
  • Any deadlines for returns,
  • Whether refunds are in cash, credit, or store credit, and
  • Any fees (e.g., restocking), including the amount or percentage charged.

Retailers must also inform consumers that they can request a written copy of the policy.

If a retailer fails to comply with these requirements, they must offer the consumer either a cash refund or store credit, at the consumer’s choice, for up to 30 days after purchase—as long as the item hasn’t been used or damaged and the buyer can verify the purchase date.

This amendment becomes effective on August 7, 2025. 

The “Click to Cancel” Provision and Other Subscription Requirements 

The Budget also amends New York’s existing auto-renewal law (General Business Law § 527-a) by requiring businesses making automatic renewal or continuous service offers to “provide the consumer with the option to cancel at any time using a simple cancellation mechanism that is as easy to use as the mechanism that the consumer used to provide consent and that is through the same medium that the consumer used to provide consent.” 

While a save attempt is allowed under the law—“the business may present the consumer with a discounted offer, retention benefit or information regarding the effect of cancellation”—businesses are prohibited from unreasonably obstructing or delaying cancellation requests or attempts, including by hanging up on customers, imposing unlawful conditions upon their ability to cancel, and misrepresenting the costs, consequences, or processes of cancellation.

Additional amendments include:

• Clear and conspicuous disclosure of material terms—including a description of the product or service subject to renewal, the amount of the costs that will be charged, the frequency of charges, the deadline (by date or frequency) to cancel, and the available cancellation mechanisms—must be made before consent to the offer or billing information is requested.
• Before charging the consumer an increased price, you must either (i) first obtain their affirmative consent to the increased price or (ii) allow them to cancel anytime within, at least, 14 days after such charge and refund the price of the remaining term at the time of cancellation, on a pro rata basis.
• Pre-renewal notices for offers with an initial term of one year or longer that renew for six months or longer must be provided, in a manner selected by the consumer (e.g., text, email, app notification), between 15 and 45 days before the cancellation deadline. 
• Notices of material change must be provided between five and 30 days prior to the date of the change.
• Where a free gift or trial of more than a month is offered, you must send the consumer a notice, in the manner selected by the consumer, between three and 21 days before the cancellation deadline for the first chargeable period.

The amendments are effective on November 5, 2025.

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These changes mark a significant advancement in New York consumer protection. With these reforms now in place, proactive compliance isn’t optional—it’s the cost of doing business in New York.