FTC and States Take Action Against Toast Inc. over Hidden and Unauthorized Fees, Deceptive Subscription and Cancellation Practices and Other Unlawful Conduct

The Federal Trade Commission, the People of the State of California by and through the Los Angeles County Counsel and San Francisco City Attorney, and the Attorneys General of the States of Colorado, Florida, Illinois, Iowa, Nebraska, Oklahoma and Utah, filed a lawsuit today against Toast Inc. and affiliated entities, alleging the restaurant software and fintech company saddles restaurants with hidden fees, unauthorized fees and unwanted add-ons; fails to deliver on its customer support promises; and makes it difficult to cancel its services.

“Small businesses are the backbone of communities across the country, and they deserve tools and services that are transparent, reliable and truthful,” said Christopher Mufarrige, Director of the FTC’s Bureau of Consumer Protection. “Toast failed to honor a number of its promises and instead imposed hidden fees, unauthorized charges and subscription traps that drained the hard‑earned profits of businesses just trying to serve their customers. These practices are illegal, and the FTC will continue to take aggressive action to ensure a fair, transparent and competitive marketplace.”

Toast markets and sells point-of-sale hardware and software and payment processing services to small businesses in the restaurant industry. Toast’s cloud-based products and services are used to take and manage orders, accept payments and track inventory, among other related services. The fintech company sells its software as an annual or biennial subscription service, billed monthly. Toast also markets and sells financing products, called Toast Capital loans, to existing Toast customers.

To obtain Toast products and services, restaurants must enroll in auto-renewing subscriptions, with an average cost of around $900 per month depending on the number of terminals used and add-on services bundled into the subscriptions, according to the complaint. Examples of add-on services include employee timekeeping, payroll processing and filing of payroll taxes.

Toast customers frequently complain that they have been enrolled in, and charged for, Toast subscription add-ons without their consent, according to the complaint.

The complaint further alleges that Toast advertises a “Pay-as-you-Go” plan where customers pay higher fees per transaction for payments processed through Toast, while getting hardware and software for $0 per month. The FTC and state co-plaintiffs allege Toast deceives customers by imposing various types of fees on the cost of its hardware and software, which Toast fails to clearly disclose to its customers.

For example, clients who fail to start processing payments within 120 days of purchasing their subscription must return all of their hardware or pay the full retail value of the hardware; restaurants that must close temporarily are still required to pay $85 a month for payment processing; and customers that wish to cancel their subscription are required to pay an undisclosed early termination fee of $150 per month for each remaining month of their contract, according to the complaint.

The complaint also alleges that Toast unilaterally charged restaurant patrons a $0.99 fee without adequate disclosure or consent of the patrons or the restaurants themselves. From September 2021 through late-July 2023, Toast added the fee to certain online orders above $10 placed through Toast’s platform. This fee—which went to Toast and not the restaurants—was on top of the fees these restaurants were already paying Toast for its services, according to the complaint.

The complaint further alleges that Toast failed to provide customers with a simple cancellation process. Instead, as alleged in the complaint, Toast instituted a counterintuitive, multi-step cancellation process that requires the involvement and coordination of multiple teams within Toast, leaving many customers to incur months or years of unwanted charges.

To cancel, the complaint alleges Toast customers must first provide 30 days’ written notice of their “intent not to renew”—a requirement that is not clearly disclosed in the enrollment flow. Even if they provide timely written notice, multiple consumers report receiving no response and incurring additional charges, according to the complaint. Others are told to call Toast’s “Customer Care” or contact Toast via live chat where they are subjected to questions about why they want to cancel and sales pitches to dissuade them from canceling, the complaint alleges.

In some instances, Toast further impedes subscription cancellation by charging high, unexpected early termination fees when customers try to cancel, according to the complaint. For example, one consumer complained that he was charged a $5,318.87 early termination fee, which Toast refused to refund, when he cancelled his account after four years.

Moreover, the complaint alleges that subscription cancellation is even more costly for customers with balances on a Toast Capital loan, an embedded financing option offered by Toast. If customers cancel their subscriptions or change providers, Toast treats this as if the customers have defaulted on their loan and requires them to immediately pay the total outstanding amount of the loan. The complaint alleges that this restriction serves as a roadblock to subscription cancellation, leading customers to choose between paying unwanted subscription charges to avoid defaulting on their loan or facing accelerated loan charges in addition to any early termination fees.

The complaint further alleges that nearly every page of Toast’s website highlights some variation of the claim that Toast customers will be able to get help from Toast customer support 24 hours a day, 7 days a week—boasting that customers will connect with “[r]eal people with real solutions” who “really get restaurants, 24/7.” During the subscription enrollment process, Toast lists “24/7/365 support” as a feature in each of its subscription packages. In reality, consumers have difficulty reaching anyone who can provide support or answer their questions at any time of day, let alone “24/7,” according to the complaint.

The complaint notes that one consumer called Toast customer support on a Saturday only to be told that the team that could help him was not available on the weekend, costing the small business owner thousands of dollars in credit card transactions. Other consumers alleged in the complaint report spending weeks to months trying to resolve their issue with customer service, often with no follow-up or the promised “real solutions.”

The complaint alleges that Toast’s conduct has violated the FTC Act, the Restore Online Shoppers’ Confidence Act and related state laws.

The Commission vote authorizing the staff to file the complaint was 2-0. The complaint was filed in the U.S. District Court for the Northern District of California.

NOTE: The Commission files a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the Commission that a proceeding is in the public interest. The case will be decided by the court.

The lead attorneys in this matter are Stephanie Liebner, Carlton Mosley and Sally Tieu in the FTC’s Bureau of Consumer Protection. The FTC appreciates the assistance of the Attorneys General of the States of Colorado, Florida, Illinois, Iowa, Nebraska, Oklahoma and Utah, the Office of the Los Angeles County Counsel and the San Francisco City Attorney for their partnership in this matter.