Two FTC cases in five days target payment-processing fees and hard-to-cancel contracts for small businesses

The Federal Trade Commission announced two cases in the same week against companies that sell payment and software services to small businesses. The first, on October 29, is a lawsuit against restaurant technology company Toast Inc. The second, on November 2, is a settlement with the payment processor Riverside Payments. The agency's own descriptions are the basis for everything below, and the Toast case is an allegation that a court has not decided.

What does the FTC say Toast did?

The FTC's October 29 release says the agency sued with the Attorneys General of Colorado, Florida, Illinois, Iowa, Nebraska, Oklahoma and Utah, plus Los Angeles County Counsel and the San Francisco City Attorney. The case was filed in the U.S. District Court for the Northern District of California. The Commission voted 2-0 to authorize it. The complaint alleges violations of the FTC Act and the Restore Online Shoppers' Confidence Act, known as ROSCA.

Toast sells point-of-sale hardware, software and payment processing to restaurants. The FTC alleges the following:

• Restaurants were enrolled in auto-renewing subscriptions and charged for add-ons, such as payroll, that they say they never approved.
• A “Pay-as-you-Go” plan advertised $0 monthly hardware and software costs, but carried higher per-transaction fees that were not clearly disclosed.
• Canceling customers owed an undisclosed early termination fee of $150 for each remaining month of the contract. One customer was allegedly charged $5,318.87 after four years of service.
• Customers had to give 30 days' written notice of intent not to renew, a requirement the complaint says was not clearly disclosed.
• From September 2021 to late July 2023, Toast allegedly added a $0.99 fee to some online orders over $10. The fee went to Toast, not the restaurant.
• Leaving Toast or canceling could be treated as a default on a Toast Capital loan, which the FTC says would make the whole balance due.
• Toast promised “24/7/365” support, but the complaint says some owners could not reach anyone who could help.

FTC Bureau of Consumer Protection Director Christopher Mufarrige said of the practices, “These practices are illegal,” according to the same release. The release lists no settlement or money relief, because the case is just starting, and it does not include a company response.

What did Riverside Payments agree to?

The FTC's November 2 release describes a settled case. The FTC and the State of Washington filed a complaint and a stipulated order against Riverside Payments Inc., its affiliate Cascade Equipment Leasing LLC and two executives, Brandon Skinner and Jason Reese, in the U.S. District Court for the Western District of Washington. A stipulated order takes effect once a judge signs it.

The agency alleges Riverside told small businesses they would save money, sometimes 40% to 60%, but that businesses that switched typically paid more. Its quote sheets allegedly left out activation, batch, data-security non-compliance and inactivity fees. The 26-page electronic contract allegedly buried an automatic renewal after the three-year term, a $695 early termination fee and an equipment lease that renewed for a year longer than the processing contract.

Riverside also promised a “risk-free” guarantee, the FTC says, but businesses that tried to cancel were often ignored or stuck in repeat calls. The agency further alleges the company told sales agents they could earn $75,000 to $95,000 a year, when agents averaged $3,787.

The settlement requires a $600,000 payment. A $32,083,921 judgment is suspended because the defendants cannot pay the full amount. It becomes due if they are found to have lied about their finances. For 60 days, Riverside must waive the early termination fee and any penalty for rescinding processing agreements, and notify customers. The order also bars misleading savings claims and requires clear disclosure of terms and a simple way to cancel.

What should a business owner check before signing?

The two cases involve different companies, but they point at the same contract terms. Owners can check them before signing or renewing. This is general information, not legal advice.

1. Ask for the full fee schedule in writing, not just the headline rate. Compare it to your last three statements.
2. Find the renewal clause, the notice period and the early termination fee before you sign.
3. Check whether equipment is leased or bought, and whether the lease outlasts the service contract.
4. If a loan or cash advance is tied to the same provider, ask what happens to it if you leave.
5. Keep proof of every cancellation notice, with the date and how it was sent.

Businesses that think they were misled can contact the FTC's Consumer Response Center at 877-382-4357, the number listed on the release, or their state attorney general. Colorado is one of the plaintiff states in the Toast case.

What happens next?

The Toast case will move through the Northern District of California, and the defendants have not been found liable. Riverside's order awaits a judge's signature, and the 60-day waiver window applies to its customers. We will update this report if the court rules or Toast files a response.