FTC and Eight Jurisdictions Sue Toast Inc. Over Hidden Fees and Cancellation Barriers

Key points

• The lawsuit was filed in the U.S. District Court for the Northern District of California by the FTC, Los Angeles County Counsel, San Francisco City Attorney, and the attorneys general of Colorado, Florida, Illinois, Iowa, Nebraska, Oklahoma, and Utah.
• Plaintiffs allege Toast’s average monthly subscription cost is approximately $900, with customers frequently charged for unwanted add-ons like payroll processing without consent.
• The complaint claims Toast’s 'Pay-as-you-Go' plan falsely advertises $0 hardware costs, while imposing undisclosed fees for hardware, payment processing, and early termination.
• Toast allegedly charged a $0.99 fee to patrons for online orders over $10 between September 2021 and July 2023, a fee that went to Toast rather than the restaurants.
• Cancellation is described as a multi-step process requiring 30 days’ written notice, with customers facing sales pitches and high early termination fees, such as one instance of $5,318.87.
• Customers with Toast Capital loans allegedly face accelerated repayment if they cancel, effectively trapping them in subscriptions to avoid loan default.

Background

This action follows a trend of FTC enforcement against subscription-based services and deceptive marketing practices. In September 2026, the FTC secured a $225 million settlement with Amway for deceptive multilevel marketing practices. Additionally, in October 2026, the FTC expanded its Amazon Prime refund settlement, raising the maximum payout to $200 and widening eligibility, highlighting ongoing federal focus on consumer protection in recurring billing and subscription models.

How outlets are covering it

The FTC and co-plaintiffs emphasize that Toast’s practices drain small business profits through hidden fees and subscription traps, with Director Christopher Mufarrige stating these actions are illegal. Iowa Attorney General Brenna Bird specifically highlighted that Toast’s hardware is not free despite advertising claims and that customers received 'lies, deception, unexplained fees, and no customer support.' Nebraska Attorney General Mike Hilgers joined the suit, noting the company’s use of financing options to hinder cancellation. All sources agree on the core allegations of deceptive fees and difficult cancellation, but state attorneys general like Bird focus more on the direct impact on local small businesses and the falsity of the $0 hardware claim, while the FTC focuses on the broader pattern of unauthorized charges and support failures.

Why it matters

This lawsuit targets a major provider of point-of-sale and payment processing services for the restaurant industry, affecting thousands of small businesses. If successful, it could force Toast to change its subscription, cancellation, and financing practices, potentially saving small businesses significant costs. It also signals continued federal and state scrutiny of fintech and subscription services that use complex terms to lock in customers.

What to watch

The case will be decided by the U.S. District Court for the Northern District of California. The FTC voted 2-0 to authorize the complaint. Toast Inc. has not yet responded to the allegations. The outcome could lead to refunds for affected businesses or changes in Toast’s business practices, particularly regarding cancellation and fee disclosure.