FTC sues Toast over hidden fees

The Federal Trade Commission and attorneys general from seven states filed a lawsuit against Toast Inc. on Thursday in the U.S. District Court for the Northern District of California. The 70-page complaint accuses the Boston-based company of charging hidden fees and using deceptive practices to prevent customers from canceling their service. Los Angeles County also joined the legal action.

Regulators allege that Toast violated the Federal Trade Commission Act and the Restore Online Shoppers’ Confidence Act. The plaintiffs seek a permanent injunction against specific business practices, along with civil fines and compensation for affected consumers. The suit targets how the company markets its subscription services to restaurant owners.

The complaint states that Toast told customers their hardware cost was zero and promised customer support 24 hours a day, seven days a week, and 365 days a year. The lawsuit argues that no Toast hardware is actually free. It further claims that customers frequently report an inability to reach support at any hour despite these promises.

Christopher Mufarrige, director of the FTC’s Bureau of Consumer Protection, said the company failed to honor its promises. “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,” Mufarrige said in a statement. He added that the FTC would take aggressive action to ensure a transparent marketplace.

The suit details the difficulty customers face when attempting to leave the platform. It alleges that Toast uses a complex cancellation process and imposes unexpected early termination fees. Even after some customers successfully canceled their accounts, the company continued to charge for subscriptions or added high-dollar fees without consent. The complaint also notes that the firm hid order processing fees from both restaurants and their patrons.

The legal action follows tens of thousands of complaints filed with the FTC, online, and directly with Toast regarding these issues. The complaint asserts that Toast continued these practices despite the volume of consumer feedback. The Globe contacted Toast for comment on Friday morning.

The lawsuit names Colorado, Florida, Illinois, Iowa, Nebraska, Oklahoma, and Utah as the seven states involved. It seeks to stop the company from using false claims to enroll consumers in subscription services. The court will now review the allegations and determine the appropriate remedies for the alleged violations.