Hidden fees in your POS contract: what the new FTC lawsuit says to look for

You decide to switch processors. You call to cancel and find out the contract renewed itself last month for another term. The notice to leave had to be in writing, 30 days before the term ended, and that rule was on page 11 of an agreement you never opened.

That is the setup the Federal Trade Commission and eight states describe in a lawsuit against Toast, filed October 29. The court hasn’t ruled, and Toast is fighting it.

What the lawsuit says

The FTC filed the case in federal court in Northern California with the attorneys general of Colorado, Florida, Illinois, Iowa, Nebraska, Oklahoma and Utah, plus Los Angeles County and San Francisco on behalf of California. According to the FTC’s announcement and the complaint, the government alleges that:

• Hardware advertised at “$0” wasn’t free. Customers on one plan had to return the hardware or pay its full retail value if they didn’t start processing payments within 120 days.
• Restaurants on that plan paid an $85 monthly inactivity fee in months with no card sales, such as a temporary closing, disclosed in small print at the bottom of the checkout page.
• Canceling cost $150 for each month left on the contract, a term on page 12 of a 25-page merchant agreement.
• Owners were charged for add-ons they say they never agreed to.
• For customers with a Toast Capital loan, canceling or switching providers without Toast Capital’s permission counted as a default, making the full balance due immediately.

Toast disagrees with the allegations and says it will “vigorously defend” itself, according to Payments Dive. It says it has cooperated with the FTC since mid-2025 and that its customers “negotiate their contracts.” It also argues that one of the laws in the case, a 2010 federal law on online subscriptions, doesn’t apply to “negotiated business-to-business agreements.” That question is now up to the court.

You don’t need to know how the case ends. The complaint is a list of places to look in your own contract.

Why it matters if you’ve never used Toast

The case is about one company’s restaurant customers. The kinds of terms it describes aren’t unique to restaurants or to one company. Renewal deadlines, exit fees, hardware repayment clauses and processor loans turn up in merchant agreements generally, and the FTC brought a case over the same kind of exit fee against another processor in 2022 (more on that below). Look for them whether you run a jewelry counter or a hotel front desk.

Toast argues that the subscription law doesn’t reach contracts negotiated between businesses. Until a court decides, assume your contract is what protects you. We covered the questions to ask before you sign. These are for the contract you already have.

Five things to check this week

1. 01The renewal date and how to give notice. Find when your term ends, whether notice has to be in writing, and how many days ahead. Put that deadline on your calendar now.
2. 02The full cost of leaving. Is the exit fee a flat amount, or a charge for every month left? Work out what leaving would cost you today. If you have a loan or advance from your processor, read what happens to it when you switch providers — that can cost more than the fee.
3. 03The hardware clause. Look for any deadline or condition that turns “free” equipment into a bill.
4. 04Fees while you’re closed. If you shut down for a season, a remodel or a slow January, find out what you still owe each month.
5. 05Every line on your last three statements. Match each monthly charge to a service you asked for. If one doesn’t match — an add-on you never asked for, a fee you can’t name — ask about it in writing and ask for it to be removed.

Start with one date

Pull your merchant agreement tonight and find the renewal clause. If you can’t find the agreement, ask your processor to send you a copy. Write the notice deadline on the calendar. If you ever want to leave, that date decides what it costs.