FTC Sues Toast Over $0 Hardware and Hidden Fees

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FTC Sues Toast Over $0 Hardware and Hidden Fees
FTC Sues Toast Over $0 Hardware and Hidden Fees
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The FTC and eight states sued Toast on Oct. 29, saying the payments company buried fees behind “$0” hardware and made canceling a trap.

Toast sells to restaurants, but the playbook in the complaint is one any processor, lender or software vendor can run: a low sticker price, per-transaction fees nobody reads, an auto-renewal, and a big bill on the way out. Here at Ecommerce Paradise the question is what this does to a store owner who signed a processor agreement and never looked at it again, and the answer is that regulators now have a template for calling those terms deceptive.

Below: what the FTC alleges, why the law behind the case survived the death of the click-to-cancel rule, what it means for your processor and financing contracts, and six checks to run this week. I covered the agency’s separate look at PayPal’s fee and protection ads on Oct. 29, so this is the second FTC payments story in a week.

When one vendor controls your cash, leaving that vendor gets expensive. Keep your store’s operating money in its own business bank account so a fight with one vendor stays a fight with one vendor. Open a Mercury account for your store →

FTC and Eight States Say Toast Hid Fees and Faked $0 Hardware

The FTC filed the complaint on Oct. 29 in the U.S. District Court for the Northern District of California, according to the agency’s press release. The commission voted 2-0 to authorize it. California joined through the Los Angeles County Counsel and the San Francisco City Attorney, along with the attorneys general of Colorado, Florida, Illinois, Iowa, Nebraska, Oklahoma and Utah.

The complaint runs 71 pages and 21 counts under the FTC Act, the Restore Online Shoppers’ Confidence Act (ROSCA) and state consumer protection laws, per The Next Web. The allegations fall into four groups.

Subscriptions and “$0” hardware. The FTC says restaurants must enroll in auto-renewing subscriptions that average about $900 a month, according to Payments Dive, with the price shifting by terminal count and add-ons like payroll and timekeeping. Customers often say they were enrolled in add-ons without consent. Toast’s “Pay-as-you-Go” plan advertises $0 monthly hardware and software, but the complaint says customers pay higher per-transaction fees and that no Toast hardware is actually $0.

Fees that surfaced late. Per the FTC release, customers who do not start processing payments within 120 days must return the hardware or pay its full retail value. Restaurants that close temporarily still pay $85 a month for processing. Canceling triggers an early termination fee of $150 for each remaining contract month, which the complaint says was not clearly disclosed. One consumer was charged $5,318.87 after four years and was refused a refund.

The FTC also alleges Toast added a $0.99 fee to certain online orders over $10 from September 2021 through late July 2023. The money went to Toast, not the restaurants, and neither diners nor restaurants were adequately told, per the release.

A cancellation maze. Customers must give 30 days’ written notice of an “intent not to renew,” a requirement the complaint says is not clearly disclosed at sign-up. Some got no response and kept getting billed. Others were routed to “Customer Care” or live chat and hit with sales pitches. Toast Capital loan holders who cancel or switch providers are treated as in default and owe the full balance at once, the FTC says.

“24/7/365” support. The complaint says nearly every page of Toast’s site and enrollment flow promises round-the-clock support, yet customers struggle to reach anyone. One owner called on a Saturday, was told the relevant team did not work weekends, and lost thousands of dollars in card transactions.

Christopher Mufarrige, director of the FTC’s Bureau of Consumer Protection, said Toast imposed “hidden fees, unauthorized charges and subscription traps,” per Restaurant Dive.

Toast disagrees. The company said it will “fight this unprecedented action through litigation,” that it has cooperated with the FTC since mid-2025, and that no court has held ROSCA applies to negotiated business-to-business agreements. Toast reports third-quarter results on Tuesday, per Payments Dive. Everything above is an allegation. No court has ruled.

Why ROSCA Still Bites After Click-to-Cancel Died in Court

The legal question is the interesting part. ROSCA is a 2010 consumer-protection law about online subscriptions. Toast’s customers are businesses that signed negotiated contracts, and Toast argues the statute does not reach them. The FTC is betting it does.

That bet matters because the agency lost its bigger weapon. The Eighth Circuit vacated the FTC’s October 2024 Click-to-Cancel Rule in July 2025 because the agency skipped a required preliminary regulatory analysis, according to a Gibson Dunn client alert. The FTC sent a draft advance notice of proposed rulemaking to restart the process on Jan. 30, 2026 and took public comment until April 13. Gibson Dunn’s read is that the FTC keeps policing subscription practices through ROSCA and Section 5 of the FTC Act in the meantime.

Enforcement has not slowed. Per American Banker, citing the law firm Hinch Newman, the FTC had brought about 50 ROSCA actions as of Dec. 17, 2025, with a largest settlement of $2.5 billion. Richard Newman, a partner at the firm, said ROSCA compliance is a priority for the FTC and state attorneys general.

Toast is not the only pricing-disclosure case on the FTC’s docket this fall. The FTC and 20 states sued Dollar General over register prices, which I wrote up in my post on that suit. Separately, the agency demanded pricing data from Walmart and Target, covered in this breakdown. The pattern is a regulator reading price disclosure and cancellation terms very literally.

The counterpoint is real. If a court agrees with Toast that ROSCA does not cover negotiated B2B deals, the FTC’s reach over fintech vendors shrinks. American Banker frames it as a test: if regulators win, fintechs serving small businesses could face consumer-style rules on cancellation and fee disclosure, and if Toast wins, the ruling limits that reach. Nobody can say which way it goes, and a ruling could take a long time.

What the Toast Case Means for Store Owners and Their Processors

My read: the case is a checklist of the places a vendor contract can hurt you, and every item translates to ecommerce. The complaint does not name any ecommerce platform or processor other than Toast, so I am not saying your vendor does any of this. I am saying you should know in about an hour whether it could.

Where the money hides. Toast’s sticker price was $0 for hardware and software, with the cost moved into transaction fees. High-ticket stores feel that move harder than anyone, because a percentage fee on a $4,000 order is real money. Hypothetical math: a 0.3 point higher rate on $50,000 of monthly card volume is $150 a month, or $1,800 a year, and you would never see it as a line item. My Stripe fee calculator shows how fast a rate change eats what you keep. The PayPal version does the same for PayPal sales.

The exit bill. Take the complaint’s $150 per remaining month. Hypothetically, a 24-month agreement canceled at month six leaves 18 months, or $2,700 on the way out. The point is not that your contract says that. The point is that most owners cannot tell me, without opening the PDF, whether theirs says anything like it. I would also check the notice window. A 30-day written notice that you miss by a week can mean another year.

Financing tied to the account. The allegation that switching providers counts as a default on a Toast Capital loan is the one I would read twice. Any merchant advance or loan from the company that also processes your cards can create the same lock-in, so read what happens to the balance if you leave. I have been blunt about why I would not take a Shopify Capital loan on a high-ticket store. Processors moving into lending is a trend to track, as with Stripe’s purchase of Parafin.

Support promises. “24/7/365” is a sentence you may have on your own site. High-ticket customers call before they spend $3,000, and a promise you cannot staff is a liability whether or not an agency ever reads it. If your pages say someone answers the phone, someone has to answer the phone.

Dependency. The Saturday story is a payments outage in miniature: an owner who could not get help while card transactions failed. I made the case for backups in my piece on your processor as a single point of failure, and this suit is a reminder that the backup plan should include the contract, not only the technology.

Three scenarios. If Toast loses or settles, expect regulators to cite it against other vendors that serve small businesses, and expect processors to tidy their cancellation flows. If Toast wins on the B2B question, nothing changes on paper, though the state law claims in the complaint may still proceed. If it drags on for a year or more, the practical effect is that vendors quietly rewrite their disclosures and you never get a clean headline. In every scenario the contract in your folder is the same contract.

One caveat on all of this. I am not a lawyer and this is not legal advice. The complaint is allegations, Toast disputes them, and what binds you is your own agreement. If you would rather hand the whole build to a team that sets up the stack with clean terms from day one, that is what the turnkey done-for-you service is for.

Your stack has fees you stopped reading. Want my team to scale the store you already have? See the scaling service →

Six Contract Checks to Run on Your Processor This Week

You do not need a lawyer to start. You need your signed agreements and a bad hour with a spreadsheet. Six checks:

  1. Pull every vendor agreement. Processor, payment gateway, merchant financing, 3PL, major apps. For each one write down four things: the term, whether it auto-renews, the cancellation notice window and the exit fee. Put each notice deadline in your calendar 60 days out. If you want a second set of eyes on the numbers, Explore Turnkey Builds.
  2. Compare the quote to the statement. Take last month’s processor statement and add every fee, including monthly minimums, gateway fees, chargeback fees and anything labeled “compliance” or “platform.” Divide by card volume. If the number is higher than the rate you were sold, email your rep and ask for the difference in writing.
  3. Separate your cash from your lenders. Keep operating money in a business account that is not tied to your processor or any advance. My walkthrough of what Mercury costs a store covers the trade-offs. Then read what happens to any outstanding loan balance if you change processors.
  4. Audit your own disclosures. If you sell service plans, memberships, installation packages or anything that renews, check that price, renewal terms and cancellation steps are plain at checkout. A policy generator like Termly can give you a first draft of your terms and policy pages, and a lawyer should review anything that renews. Keep dated screenshots of your checkout. When a customer disputes a charge, those are your evidence, and a service like ClearSale can take on the fraud side of chargebacks.
  5. Make your support promise true. If the site says someone picks up, staff it. A business line with texting through Quo keeps calls and messages in one place. A virtual assistant hired on OnlineJobs.ph can cover the hours you cannot. If you cannot cover weekends, take “24/7” off the page.
  6. Tag fees every month. Create a “processor and platform fees” category in QuickBooks and review it monthly. My guide on cutting operating costs as your store grows shows where else the leaks tend to be.

Frequently Asked Questions

Did Toast break the law?
No court has decided that. The FTC and eight states allege it did, Toast denies it, and the case is at the start of a long process.

Does this suit hit my Shopify store?
The complaint names Toast Inc. and affiliated entities, and Toast is a restaurant point-of-sale and payments company. It does not accuse any ecommerce platform. The practices it describes are worth checking in any contract, and my Clover vs Square comparison shows how much contract terms vary even among POS providers.

What is ROSCA in plain English?
The Restore Online Shoppers’ Confidence Act of 2010 is a federal law aimed at online subscriptions and negative-option offers. In plain terms it expects clear disclosure of the terms, real consent to be charged, and a simple way to cancel.

Can I leave a processor contract early?
Read the term, the notice window and the exit fee first, then ask your rep in writing what leaving costs. A lawyer can tell you what is enforceable where you are located. I cannot.

Should I take financing from my processor?
Read what happens to the balance if you leave, because that clause is one of the Toast allegations. I would also compare it to a plain business credit card or credit line, which I broke down in my card versus credit line guide.

I do not have a store yet. Where do I start?
Start with my guide to what high-ticket dropshipping is. Then pick a niche from my free high-ticket niches list and read every contract before you sign it.

Want 1-on-1 coaching to launch or fix your high-ticket store, contracts and all? Get the coaching details →

I will keep watching the Toast docket and the next round of FTC subscription actions. Subscribe to the YouTube channel for daily breakdowns. More breaking news coming through the day.

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