The restaurant technology provider is accused of imposing unauthorized charges, misleading businesses about pricing and making it difficult for customers to cancel their services.
The Federal Trade Commission and state authorities have filed a lawsuit against Toast Inc., accusing the restaurant software company of deceptive billing practices, undisclosed fees and subscription policies that allegedly left small businesses paying for services they did not want.
The lawsuit, filed Thursday in federal court in Northern California, targets the company’s subscription agreements, cancellation procedures and customer support representations, according to the FTC. The allegations were also reported by Bloomberg on October 29.
Toast, which provides payment processing, point-of-sale systems and business management software to restaurants, allegedly enrolled customers in additional services without their authorization and imposed charges that were not adequately disclosed when businesses signed up.
The FTC brought the case alongside attorneys general from Colorado, Florida, Illinois, Iowa, Nebraska, Oklahoma and Utah, as well as authorities representing Los Angeles County and San Francisco.
Subscription Fees Under Scrutiny
According to the FTC’s complaint, restaurants using Toast’s services pay approximately $900 per month on average, depending on the number of payment terminals and additional software products included in their subscriptions.
Regulators allege that some businesses were charged for optional features, including payroll and employee management tools, without providing consent.
The lawsuit also challenges Toast’s advertising of a payment plan offering hardware and software at no monthly cost in exchange for higher transaction processing fees.
According to the FTC, the arrangement carried additional financial obligations that were not sufficiently explained to customers. Businesses that failed to begin processing transactions within 120 days could be required to return their equipment or pay its retail value.
Restaurants temporarily suspending operations could also face monthly processing charges, while businesses seeking to terminate their agreements could incur fees based on the remaining duration of their contracts.
The complaint further alleges that Toast collected a 99-cent fee on certain online restaurant orders exceeding $10 between September 2021 and July 2023 without adequately informing restaurant operators or their customers. The proceeds went to Toast rather than the restaurants, according to regulators.
Cancellation Policies Draw Regulatory Attention
Federal and state authorities also contend that Toast created unnecessary obstacles for restaurant operators attempting to discontinue their subscriptions.
According to the FTC, customers were required to submit written notice before their agreements renewed and, in some cases, navigate several customer service departments before cancellation requests could be processed.
Some businesses allegedly continued receiving bills after requesting termination.
In one case described by regulators, a customer reported being assessed more than $5,300 in termination fees after closing an account that had been active for four years.
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The complaint also raises concerns about Toast Capital, the company’s restaurant financing operation. Regulators allege that businesses with outstanding loans could be required to repay their remaining balances immediately if they canceled Toast subscriptions or switched service providers.
Authorities argue that these arrangements discouraged restaurants from ending their contracts, even when they no longer wanted the company’s services.
Customer Support Promises Challenged
The lawsuit also questions Toast’s representations about the availability of customer assistance.
Toast promoted round-the-clock support as a feature of its subscription packages, but regulators allege that restaurant operators frequently struggled to obtain timely assistance.
The FTC cited complaints involving unresolved technical problems, limited access to specialized support personnel and delays that allegedly disrupted business operations.
Iowa Attorney General Brenna Bird separately criticized the company’s practices, saying restaurants in her state had encountered unexpected charges and inadequate assistance after signing up for Toast’s services.
According to a statement from Bird’s office, thousands of complaints concerning Toast’s business practices have been submitted to regulators, online platforms and the company itself.
Toast Rejects Allegations
Toast said it intends to vigorously defend itself against the lawsuit, according to financial news service The Fly, as reported by TipRanks.
The company faces allegations of violating the Federal Trade Commission Act, the Restore Online Shoppers’ Confidence Act and several state consumer protection laws.
The FTC is seeking court-ordered relief, including financial remedies and restrictions on unlawful conduct, according to its official case filing.
Source: Bloomberg
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