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Labor, Commerce and Industry subcommittee hears wide-ranging testimony on two chatbot bills and carries them over
Summary
The South Carolina Labor, Commerce and Industry subcommittee heard hours of testimony on Senate Bills S-896 and S-1037, which would impose broad consumer-protection rules on chatbot systems — including opt-in data use, parental consent for minors, monthly risk assessments and a new private right of action — before agreeing to carry both bills for amendment and further consideration.
The Labor, Commerce and Industry subcommittee heard testimony on two Senate bills that would regulate chatbot and generative-AI systems, and the panel agreed to carry both measures to a future subcommittee meeting for amendment.
Sponsor Senator Lieber introduced the legislation as a consumer-protection package aimed at risks from AI chatbots, saying the bills address “manipulation, privacy violations, and harm to users” and asking for the committee’s support. Committee staff summarized S-896 as creating a new chapter under Title 39, broadly defining “chatbot,” and requiring affirmative opt-in consent before a provider processes personal data.
The staff summary said S-896 would prohibit the sale of chat logs, cap retention at 10 years, require parental consent when minors’ data are used, limit profiling to cases strictly necessary to fulfill user requests, require monthly risk assessments and public disclosures by providers, direct the attorney general to set risk standards by regulation, and treat chatbots as products for civil liability purposes with a private right of action allowing statutory damages of up to $5,000 per violation.
Proponents emphasized child safety and accountability. Kimberly Long, chapter leader of Mothers Against Media Addiction and a special-education coach, cited reported incidents in which chatbots gave harmful guidance to teens and said legislators must act to protect children. “I respectfully urge you to move these bills forward to protect some of the most precious among us,” she told the subcommittee.
Jennifer Joy Madden, a children’s developmental-wellness educator, described hypothetical and reported cases of toys and chatbots collecting data and forming attachments with minors and said independent safety research is scarce, making legal protections and company accountability necessary.
Industry witnesses and trade groups urged narrowing the bills’ scope. Christa Hinson, speaking for retail technology interests, warned that the draft language could sweep ordinary customer-service chatbots into the law’s requirements and asked the committee to align definitions with other states and to include explicit exceptions for routine e-commerce functions.
Aaron Siegel of the Entertainment Software Association said interactive features common in modern video games — nonplayer characters and entertainment-driven dialogue — are functionally different from chatbots used in high-risk contexts such as health or finance and asked for clarifying language so games are not unintentionally regulated. “These interactions may feel conversational, but they are clearly part of an entertainment setting and are not designed to provide real world advice,” he said.
Representatives of banks and financial institutions told the panel most uses by banks occur behind authenticated accounts and are already subject to industry regulation; Neil Rashley, general counsel for the South Carolina Bankers Association, warned that S-896’s broad definitions could sweep regulated banking functions into new obligations and litigation exposure.
Several witnesses representing startups and small developers said the bill’s compliance costs — monthly risk assessments, affirmative consent regimes, potential statutory damages and ongoing regulatory requirements — could be onerous for small or open-source projects and urged safe harbors for low-risk developers.
Committee members asked technical and legal questions, including whether existing products-liability law or the federal Section 230 framework addresses harms from chatbots; witnesses and other speakers said the law is unsettled and that legislation could provide necessary clarity.
The sponsor and industry representatives said they were open to working on amendments. The chair urged parties to circulate proposed amendment language and said the subcommittee will convene another meeting before sending a bill to the full committee. The panel took a motion to carry over both bills for later consideration.
Next steps: staff were directed to collect suggested amendments from sponsors and stakeholders, and the subcommittee will meet again before the next full committee date to consider revised language and any carve-outs or clarifications.
