CHICAGO— Attorney General Kwame Raoul, along with the Federal Trade Commission and a coalition of states, filed a bipartisan lawsuit against Toast Inc. alleging the restaurant software and fintech company saddles restaurants with hidden fees and unauthorized charges, fails to deliver on its customer support promises, and makes it difficult to cancel its services.
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, track inventory and more. The fintech company sells its software through annual or biennial subscriptions, billed monthly. Toast also markets and sells financing products, called Toast Capital loans, to existing Toast customers.
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“Our lawsuit alleges that Toast took advantage of small business owners by charging hidden fees and automatically signing them up and charging for add-ons that they didn’t want,” Raoul said. “The company also failed to provide the customer service it promised and made it unnecessarily confusing and difficult to cancel subscriptions. I remain committed to working with my colleagues and federal partners to hold companies accountable when they break the law.”
“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.”
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. Examples of add-on services include employee timekeeping, payroll processing and filing of payroll taxes. According to Raoul and the coalition’s complaint, Toast customers frequently complain that they have been enrolled in, and charged for, add-ons without their consent.
Toast advertises a “pay-as-you-go” plan where customers pay higher fees per transaction for payments processed, while getting hardware and software for $0 per month. The complaint alleges that Toast deceives customers by imposing various types of fees on the cost of its hardware and software, which Toast fails to clearly disclose. 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.
The complaint also alleges that Toast unilaterally charged restaurant patrons a $0.99 fee without adequate disclosure or consent from the patrons or the restaurants. 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.
The complaint further alleges that Toast failed to provide its customers with a simple cancellation process. Instead, Toast uses a multi-step cancellation process that requires the coordination of multiple teams within Toast, leaving many customers to incur months or years of unwanted charges. In some instances, Toast charged high, unexpected early termination fees when customers tried to cancel. For example, one consumer complained that he was charged a $5,318.87 early termination fee when he canceled his account after four years.
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 forced 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.
Raoul and the coalition also allege that Toast does not live up to its promises regarding customer service. 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, seven days a week. 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 anytime 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, costing the small business owner thousands of dollars of credit card transactions. Other consumers 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 violates the FTC Act, the Restore Online Shoppers’ Confidence Act, as well as Illinois consumer protection laws.
Joining Raoul and the FTC in the bipartisan lawsuit are 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 Colorado, Florida, Iowa, Nebraska, Oklahoma and Utah.
