In the Toast FTC lawsuit filed on 29 October 2026, the Federal Trade Commission, joined by California through the Los Angeles County Counsel and San Francisco City Attorney and by the attorneys general of Colorado, Florida, Illinois, Iowa, Nebraska, Oklahoma and Utah, alleges the restaurant software and payments company imposed hidden and unauthorized fees, made subscriptions hard to cancel and failed to deliver the “24/7/365” support it advertised. Fintechbits read the FTC’s announcement in full, and it alleges that when a restaurant with a Toast Capital loan cancels or switches provider, Toast treats it as a loan default and demands the whole outstanding balance at once, a point Toast’s response does not address.

Toast said it “strongly disagree[s]” with the allegations and will fight the case.

What the Toast FTC lawsuit alleges

The FTC’s announcement sets out four groups of claims. Restaurants must enroll in auto-renewing subscriptions that average around $900 a month, and customers complain of add-ons they never agreed to. Toast’s “Pay-as-you-Go” plan advertises $0 hardware and software, but the complaint lists charges that sit behind it: full retail value for hardware if a restaurant does not start processing within 120 days, $85 a month in processing fees during a temporary closure, and an early termination fee of $150 for each remaining month of the contract.

The Toast FTC lawsuit also covers what diners paid. From September 2021 to late July 2023, Toast added a $0.99 fee to certain online orders above $10, and the money went to Toast rather than the restaurant. On cancellation, the complaint describes 30 days’ written notice that is not clearly disclosed at sign-up, sales pitches to stay, and one owner charged a $5,318.87 termination fee after four years.

The Commission voted 2-0 to file the Toast FTC lawsuit, which rests on the FTC Act, the Restore Online Shoppers’ Confidence Act (ROSCA) and state consumer protection laws.

Toast’s defence

Toast’s statement argues that ROSCA, a law aimed at online consumer subscriptions, does not reach “negotiated business-to-business agreements”, and says no court has held that it does. Toast says it has cooperated with the FTC since mid-2025 and tried to settle. It also says nothing changes for its nearly 200,000 business locations.

That is Toast’s best argument. If the court in the Toast FTC lawsuit agrees that ROSCA stops at consumer contracts, a large part of the case narrows to the FTC Act deception claims and the state laws.

Fintechbits analysis

Why the loan clause matters more than the fee list

Fee disputes are common in point of sale. The Toast Capital allegation in the Toast FTC lawsuit is different, because it ties the lending product to the subscription. A restaurant that wants to leave faces the termination fee and, according to the FTC, an immediate demand for its whole loan balance. That turns embedded finance from a convenience into a switching cost, and it is the part of the case other fintechs selling software plus loans should read closely.

It also explains why Toast is fighting instead of settling. Embedded payments and lending are central to Toast’s revenue, so any order that loosens the link between the loan and the subscription would reach its business model as well as its sales pitch. Rivals such as Square have pushed discounts to win restaurants, as Fintechbits noted in Square’s franchise push, and a public complaint about cancellation costs hands them a sales script. Embedded finance carries obligations long after launch, as Fintechbits set out in its look at embedded finance compliance after launch.

Fintechbits’ view: the ROSCA question at the centre of the Toast FTC lawsuit is open, but the deception claims about $0 hardware and round-the-clock support do not depend on it. Toast can win the legal point and still have to change how it sells.

Frequently asked questions

What is the Toast FTC lawsuit about?

The FTC and nine state and local plaintiffs allege Toast charged restaurants hidden and unauthorized fees, made subscriptions hard to cancel and falsely promised 24/7 support. The complaint was filed on 29 October 2026 in federal court in Northern California.

How does Toast Capital feature in the case?

The FTC alleges that if a customer with a Toast Capital loan cancels or changes provider, Toast treats it as a default and requires immediate repayment of the outstanding balance, which can stack on top of early termination fees, per the FTC announcement.

What does Toast say about the Toast FTC lawsuit?

Toast says it will vigorously defend itself and argues that ROSCA does not apply to negotiated business-to-business contracts. It says customer pricing and support are unchanged.

What to Watch Next

The first test of the Toast FTC lawsuit is whether Toast moves to dismiss the ROSCA counts, which would show how much of the case survives on consumer-law grounds alone. Toast’s third-quarter results on 3 November are the other marker: watch for any change in how it describes Toast Capital, termination terms or legal reserves.