FTC and states sue Toast, alleging hidden fees and cancellation traps for restaurants

The Federal Trade Commission and a group of states sued Toast Inc. in federal court in the Northern District of California on October 29, 2026, accusing the Boston-based seller of restaurant point-of-sale systems of charging hidden and unauthorized fees, adding services customers did not want and making its subscriptions hard to cancel. The co-plaintiffs are the attorneys general of Colorado, Florida, Illinois, Iowa, Nebraska, Oklahoma and Utah, and the People of the State of California, represented by the Los Angeles County Counsel and the San Francisco City Attorney.

Toast sells hardware, cloud-based software and payment processing that restaurants use to take orders, accept payments and track inventory, and it lends to customers through Toast Capital loans. The complaint, authorized by a 2-0 commission vote, accuses Toast and affiliated companies of violating the FTC Act, the Restore Online Shoppers' Confidence Act (ROSCA) and state consumer protection laws.

What the complaint says Toast charged

Toast advertises a “Pay-as-you-Go” plan that charges higher fees on each payment in exchange for hardware and software at $0 a month, the complaint says, but it adds costs that it does not clearly disclose. Among the examples:

To cancel, the plaintiffs say, customers first had to send written notice 30 days ahead, stating their “intent not to renew,” a condition the sign-up process did not make clear, and some who phoned or used live chat were asked why they wanted to go and pitched to stay. One customer who quit after four years said he was billed an early termination fee of $5,318.87, which Toast would not refund. For customers repaying a Toast Capital loan, the complaint says, canceling or moving to another provider counted as a default, so the entire balance fell due at once.

It also calls Toast's promise of “24/7/365 support,” listed in every subscription package, false. One owner who called support on a Saturday was told the team that could help him did not work weekends, and the complaint says this cost him thousands of dollars in credit card transactions. The plaintiffs say at least tens of thousands of consumers have raised such problems with the FTC, online or with Toast.

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.

Toast's position

Toast disputed the FTC's claims before the suit was filed. In a quarterly report filed with the Securities and Exchange Commission on August 5, it said the FTC had sent it a civil investigative demand in June 2025 and a draft complaint and proposed settlement order in June 2026. The company said it “strongly disagrees with the FTC’s legal challenges to its practices, policies and procedures,” including whether some of the laws cited apply to its type of business, and that it was prepared to litigate.

Toast said it served about 180,000 locations at the end of June, 22% more than a year earlier, and handled $215 billion of gross payment volume in the 12 months to June. Most of its revenue comes from financial services rather than software, according to the complaint, which cites the company's figures.

The law behind the case

Three of the six federal counts rest on ROSCA, a 2010 law covering “negative option” offers sold online, in which a seller treats a customer's silence or failure to cancel as consent to be charged. They accuse Toast of failing to disclose required terms, get express informed consent before charging and offer a simple way to stop recurring charges; the other three concern deceptive claims about its services and support, and fees charged without consent.

The FTC had tried a broader route: in October 2024 it voted 3-2 to amend its 1973 negative option rule, adding requirements that included a simple cancellation mechanism, but the U.S. Court of Appeals for the Eighth Circuit vacated the amended rule on July 8, 2025, finding that the commission had not followed procedural requirements of the FTC Act. ROSCA cases have continued: in September 2025, Amazon settled FTC claims over Prime enrollment and cancellation with a $1 billion civil penalty and $1.5 billion in refunds.

What comes next

The plaintiffs seek a permanent injunction and monetary relief, and for the states, civil penalties, damages or restitution under their own laws. The commission sues when it has “reason to believe” the law is being or is about to be broken, and the court will decide the case.