States Take Action against Toast Inc. in a lawsuit alleging that the restaurant technology company charged businesses and diners hidden or unauthorized fees, made subscriptions difficult to cancel, and failed to provide promised customer support. The Federal Trade Commission and a group of state and local officials filed the case in federal court in Northern California.
The plaintiffs include the FTC, California through two local offices, and attorneys general from Colorado, Florida, Illinois, Iowa, Nebraska, Oklahoma and Utah. Their allegations have not been decided by the court.
States Take Action Over Fees and Subscriptions
The complaint says restaurants must enroll in auto-renewing subscriptions. Prices vary by terminal count and add-ons such as timekeeping, payroll processing and tax filing. Customers have complained they were charged for add-ons without consent.
The plaintiffs challenge Toast’s advertised “Pay-as-you-Go” plan, which the complaint says offers hardware and software for $0 per month while charging higher transaction fees. The lawsuit alleges other hardware and software charges were not clearly disclosed.
The complaint says customers who do not start processing payments within 120 days must return hardware or pay full retail value. Temporarily closed restaurants allegedly still owe $85 monthly. Customers canceling may face an undisclosed $150 monthly fee for each remaining contract month.
The complaint alleges Toast added a $0.99 fee to certain platform orders above $10 from September 2021 through late-July 2023. It says Toast, not restaurants, received the fee, on top of restaurants’ service charges, without adequate disclosure or consent.
Cancellation and Support Practices Challenged
The complaint describes cancellation as a multi-step process involving several Toast teams. It alleges customers must give 30 days’ written notice of intent not to renew, a requirement not clearly disclosed during enrollment. Some reportedly received no response and continued to incur charges.
Other customers were allegedly directed to phone support or live chat, where they faced questions about their reasons for leaving and sales pitches. One consumer said he was charged a $5,318.87 early termination fee after canceling following four years, and that Toast refused to refund it, according to the complaint.
The filing also says customers with outstanding Toast Capital loan balances may face accelerated repayment if they cancel subscriptions or change providers. The complaint alleges Toast treats those decisions as loan defaults and demands immediate payment of the outstanding balance. That allegation describes a claimed barrier to cancellation; the court has not ruled on it.
Toast sells restaurant hardware, software, payment processing and financing. Its annual or biennial subscriptions are billed monthly, according to the FTC. The plaintiffs also allege that customers promised “24/7/365” support struggled to reach help. One owner said a Saturday call reached no available team and cost thousands of dollars in card transactions.
The FTC says the alleged conduct violates the FTC Act, the Restore Online Shoppers’ Confidence Act and related state laws. The Commission authorized the filing by a 2-0 vote, and the case was filed in the U.S. District Court for the Northern District of California. The court will decide the claims. The filing adds to legal coverage of regulatory accountability, issues facing smaller law firms and business law disputes, though those articles concern separate matters.
The court will consider the FTC and state allegations and decide the case.
