Court of Justice of the European Union clarifies expectations on consumer protection and mortgage enforcement

RegCORE Client Alert | Banking Union

QuickTake

On 24 June 2025, the Court of Justice of the European Union (CJEU) published its judgment in Case C-351/23 (GR Real) (the Judgment).See press release.Show Footnote The case arose from a Slovak context, where consumers lost their family home through an extrajudicial auction based on a mortgage contract, despite having initiated legal proceedings to challenge the enforcement on the grounds of potentially unfair contractual terms. The Slovak court applied to the CJEU for a preliminary ruling.

Courts and tribunals of the Member States are able to refer questions to the CJEU regarding the interpretation of EU law or the validity of an EU act in disputes that have been brought before them through a reference for a preliminary judgement. A dispute for which a preliminary ruling is requested is not resolved by the CJEU – it remains the responsibility of the national court or tribunal to resolve the case in accordance with the CJEU’s decision. Importantly, a decision in a preliminary ruling (such as the Judgment) must also be followed by other national courts or tribunals (not just the one that requested the preliminary ruling) that confront a comparable issue. Accordingly, this Judgment clarifies expectations in a pan-EU manner both for Banking Union and non-Banking Union EU Member States. As explored in this Client Alert, this Judgment marks a significant development in the intersection of consumer protection, mortgage enforcement and the rights to effective judicial protection and housing.

Key takeaways from the CJEU Judgment

Following a request for a preliminary ruling from the Regional Court of Prešov (Slovakia), the CJEU interpreted the application of Directive 93/13/EEC on unfair terms in consumer contracts, particularly in situations where national law allows for the extrajudicial enforcement of a mortgage (including the sale of a family home) even while a judicial challenge to the enforcement is pending.The Regional Court of Prešov is often cited in a Slovak context as adopting a pro-consumer stance in its decision-making. For more details on the Slovak context please contact Michal Pališin and Lucia Rusnáková.Show Footnote The CJEU also considered the compatibility of such national procedures with the Charter of Fundamental Rights of the European Union (the Charter), specifically Articles 7 (right to respect for private and family life, including the home) and 47 (right to an effective remedy and to a fair trial).

The Judgment aims to clarify the following key points:

1.   Scope of Directive 93/13/EEC: The CJEU held that the Directive applies to judicial proceedings in which consumers, having actively challenged the enforcement of a mortgage on their family home, seek to contest the lawfulness of the transfer of ownership to a third party (such as a company acquiring the property at auction). This is particularly the case where there is corroborating evidence of potentially unfair terms in the underlying contract and the transferee was aware of ongoing legal proceedings at the time of the transfer. This protection applies as soon as the consumer has actively made use of available legal remedies to challenge the enforcement and there are consistent indications of the unfair nature of the disputed clause.

2.   Requirement for effective judicial protection: The CJEU found that national legislation permitting the continuation of extrajudicial enforcement (and the transfer of ownership) despite a pending application for suspension based on potentially unfair terms is contrary to EU law. The absence of a mechanism to obtain, by judicial means, the annulment of such enforcement on the grounds of unfair contractual terms further exacerbates the incompatibility with EU law. Accordingly, a consumer must be able to obtain an effective suspension of the enforcement proceedings as long as the validity of the contractual term is being challenged in court. Otherwise, the protection offered would be purely compensatory and therefore insufficient, especially when the family home is at stake.

3.   Protection of housing and fundamental rights: The CJEU emphasised that the right to accommodation is a fundamental right under Article 7 of the Charter. Any enforcement procedure that may result in the loss of a consumer’s home must be subject to the highest degree of procedural scrutiny and must ensure effective judicial remedies before the enforcement is completed.

4.   Nullity of the sale and time limits for remedies: The CJEU clarified that, where national legislation (in this case, the Slovak law on voluntary auctions) did not reasonably allow the consumer to bring an action for annulment of the sale within the prescribed time limit, the consumer cannot be barred from challenging the enforcement. The importance of the public interest in consumer protection justifies that the effectiveness of the rights arising from Directive 93/13 takes precedence over considerations of legal certainty regarding the transfer of ownership already carried out. The CJEU noted that recent case law of the Slovak Supreme Court now accepts that the existence of unfair terms in the contract underlying the enforcement constitutes grounds for nullity of the auction sale. In its Judgment, the CJEU invited the referring court to interpret national law in conformity with Directive 93/13, while ensuring the participation of the professional lender in the proceedings if the sale is challenged.

5.   Limits to legal certainty for third-party acquirers: While the principle of legal certainty and the protection of bona fide third-party acquirers are important, the Judgment holds that these do not take absolute precedence where the transfer of ownership occurs in circumstances that deprive consumers of effective judicial protection against unfair terms. If the acquirer was aware of ongoing legal challenges, the protection of their property rights may be limited.

This Judgment is part of a consistent line of demanding European case law on consumer protection in the face of the risk of losing one’s home. It requires Member States and credit professionals to exercise increased vigilance regarding the effectiveness of remedies and the fight against unfair terms – failing which – transfers of ownership already completed may be called into question. As explored below this may warrant some market participants needing to adapt their practices and procedures to comply with the clarifications set out in the Judgment when dealing with consumers.

Key considerations

The CJEU’s interpretation of Directive 93/13/EEC has significantly enhanced the procedural safeguards available to consumers facing mortgage enforcement actions. The CJEU has emphasised that consumers must have a real and effective opportunity to challenge the lawfulness of enforcement actions—particularly when those actions are based on potentially unfair contractual terms. This interpretation is rooted in the recognition that consumers are typically in a weaker bargaining position compared to lenders, both in terms of negotiating power and legal knowledge. 

Equally, the CJEU’s Judgment clarifies that national legal systems must provide consumers with effective means to prevent or suspend enforcement actions when there is a credible allegation of unfair terms in the underlying contract. This includes the right to seek interim relief (such as a suspension of the enforcement or auction) and to have the substance of their claim reviewed by a court before any irreversible steps—like the sale of the family home—are taken. This requirement goes beyond what may already exist in Member States’ individual statutory provisions on family homes and/or those that are vulnerable customers or otherwise as set out in respective supervisory guidelines in existence in certain Member States that go beyond EU-level supervisory guidelines, when it comes to mortgages and enforcements. 

The CJEU has also addressed the scope of judicial review available to consumers. National laws must allow consumers to seek the annulment of enforcement actions or property transfers if they are based on unfair terms. If national law does not provide for such a remedy, or if the available remedies are not effective in practice, this is contrary to Directive 93/13/EEC and the Charter. 

In practical terms this means that some firms may want to consider:

1.   Review and adaptation of enforcement procedures: Regulated firms (including banks, mortgage lenders, and entities involved in the acquisition of distressed assets) must ensure that their risk management frameworks, particularly in relation to credit risk, operational risk, legal risk as well as enforcement and recovery procedures are fully compliant with the requirements of Directive 93/13/EEC and the Charter. This includes:

a.   Suspending enforcement actions (including auctions and transfers of ownership) where there is a pending judicial challenge based on potentially unfair terms.

b.   As discussed below, ensuring that consumers are provided with clear, accessible, and effective means to challenge enforcement both before and after the sale, particularly where the property is a family home.

2.   Contractual terms and transparency: Rigorously reviewing their standard contractual terms, especially acceleration clauses and other provisions that may trigger enforcement. Any lack of transparency or potential unfairness in such terms can render subsequent enforcement actions vulnerable to challenge and annulment. 

3.   Due diligence in acquisitions: Entities acquiring properties or portfolios of loans may need to conduct further enhanced due diligence to ascertain whether any ongoing legal proceedings or challenges based on unfair terms exist and assess the risk that the transfer of ownership could be cancelled/voided if the enforcement was based on unfair terms and the acquirer was aware of ongoing legal challenges. Acquiring assets in the face of such challenges may expose the acquirer to the risk of annulment of the transfer and potential liability.

4.   Procedural safeguards and consumer communication: Firms must implement robust internal procedures to ensure that all relevant parties (including auctioneers, notaries, and potential acquirers) are informed of any pending legal proceedings or consumer objections. Failure to do so may undermine the enforceability of the transfer and expose the firm(s) to regulatory and legal risk.

5.   Regulatory and supervisory engagement: Supervisory authorities are likely to increase scrutiny of firms’ enforcement practices, particularly in light of the CJEU’s clear articulation of the need for effective judicial protection. Firms should proactively engage with regulators to demonstrate compliance and to adapt policies and procedures as necessary.

6.   Potential for retrospective challenges: The Judgment opens the door for consumers to challenge past enforcement actions and property transfers where effective judicial remedies were not available or where the enforcement was based on potentially unfair terms. Firms should assess their historical enforcement actions for potential exposure and consider remediation strategies. Relevant firms should prepare for an increase in litigation and consumer challenges and should consider alternative dispute resolution mechanisms to address consumer complaints efficiently.
 
7.   Training and awareness: Staff involved in loan origination, enforcement, and asset management should be trained on the implications of the Judgment and the importance of consumer rights. 

8.   Policy and procedure updates: All relevant policies and procedures should be updated to reflect: (i) the need for suspension of enforcement pending judicial review; (ii) the requirement for effective consumer communication and access to remedies; and (iii) the process for handling third-party acquisitions where legal challenges are pending

9.   Robust internal communication and record-keeping: In light of the above, firms must ensure they maintain robust internal communication protocols to ensure that: (i) all relevant departments (enforcement, legal, compliance, asset management) are promptly informed of any consumer objections or pending legal proceedings; (ii) auctioneers, notaries and potential acquirers are notified of ongoing challenges before any sale or transfer is completed; and (iii) accurate records are kept of all communications with consumers and third parties regarding enforcement and legal challenges.

As noted above the Judgment provides a clear reminder of the importance of firms adopting consumer-centric communication strategies, including:

i.   Proactively informing consumers: of their rights under Directive 93/13/EEC and the Charter, especially the right to challenge enforcement based on unfair terms; 

ii.   Providing timely updates to consumers: about the status of enforcement proceedings and any legal remedies available;

iii.   Ensuring that all communications are clear, accessible, and in plain language: so that consumers understand their options and the consequences of enforcement actions.

Firms must inform consumers of their rights at all critical stages of the contractual and enforcement process:

iv.   At contract formation: When entering into a mortgage or loan agreement, firms should provide clear, accessible information about the consumer’s right to challenge unfair terms, including the legal basis for such challenges under Directive 93/13/EEC.

v.   Upon default or initiation of enforcement: If the firm intends to accelerate the loan or commence enforcement (e.g., auction or repossession), the consumer must be reminded of their right to contest the enforcement on the grounds of unfair terms before any irreversible steps are taken; and

vi.   During enforcement proceedings: If enforcement is initiated, firms must ensure that consumers are aware of their right to seek interim relief (such as suspension of the enforcement or auction) and to have the substance of their claim reviewed by a court prior to the sale or transfer of the property.

Firms are reminded that the information provided to consumers must be:

vii.   Clear and understandable: Avoiding legal jargon and using plain language so that the average consumer can understand their rights and the procedures available to them;

viii.   Comprehensive: Detailing the specific rights to challenge unfair terms, the procedures for doing so, the possibility of seeking interim relief, and the consequences of not acting (e.g., loss of the right to challenge after certain deadlines); and

ix.   Actionable: Including practical steps, such as how to file a challenge, where to seek legal assistance, and the relevant deadlines for initiating proceedings or seeking suspension of enforcement.

Firms are reminded to use multiple channels to ensure effective communication:

x.   Written notices: All contractual documents, default notices, and enforcement communications should include a dedicated section outlining the consumer’s rights under Directive 93/13/EEC; 

xi.   Verbal explanations: Where possible, especially at the point of contract signing or during enforcement meetings, firms should verbally explain these rights and answer any questions the consumer may have; and

xii.   Supplementary materials: Firms should provide brochures, FAQs, or links to official resources (such as consumer protection agencies or ombudsman services) that further explain the right to challenge unfair terms.

The duty to inform is ongoing and must be repeated at each relevant stage, especially if the consumer’s circumstances change or if new legal remedies become available (e.g., due to changes in national case law or legislation). Firms may want to ensure they therefore keep records of all communications provided to consumers regarding their rights, to demonstrate compliance with the Directive and to protect against future disputes. Such documentation is also relevant in ensuring a firm is not subject to sanctions in the event of a failure to inform consumers. Where levied, such sanctions can result in (a) invalidation of enforcement actions, (b) supervisory and consumer protection authority led sanctions; and (c) civil liability and consumers being possibly entitled to compensation for losses suffered as a result of not being informed of their rights.

Outlook

The CJEU’s Judgment significantly strengthens the procedural and substantive protections available to consumers facing mortgage enforcement, particularly in relation to their family homes. The obligation to inform is not merely procedural but is rooted in the fundamental rights to housing and effective judicial protection (Articles 7 and 47 of the Charter of Fundamental Rights). The Judgment reminds firms that they must recognise that the loss of a home is a severe interference with these rights and the information provided must empower consumers to exercise their rights fully and effectively.

For relevant regulated firms, this may necessitate a comprehensive review and, where necessary, overhaul of enforcement practices, contractual documentation, and due diligence processes. The Judgment underscores the primacy of effective judicial protection and the fundamental right to housing in the context of consumer credit and mortgage enforcement, with far-reaching implications for the conduct of regulated financial services firms across the EU.

About us

PwC Legal is assisting a number of financial services firms and market participants in forward planning for changes stemming from relevant related developments. We have assembled a multi-disciplinary and multijurisdictional team of sector experts to support clients navigate challenges and seize opportunities as well as to proactively engage with their market stakeholders and regulators.

Moreover, we have developed a number of RegTech and SupTech tools for supervised firms, including PwC Legal’s Rule Scanner tool, backed by a trusted set of managed solutions from PwC Legal Business Solutions, allowing for horizon scanning and risk mapping of all legislative and regulatory developments as well as sanctions and fines from more than 2,500 legislative and regulatory policymakers and other industry voices in over 170 jurisdictions impacting financial services firms and their business.

Equally, in leveraging our Rule Scanner technology, we offer a further solution for clients to digitise financial services firms’ relevant internal policies and procedures, create a comprehensive documentation inventory with an established documentation hierarchy and embedded glossary that has version control over a defined backward plus forward looking timeline to be able to ensure changes in one policy are carried through over to other policy and procedure documents, critical path dependencies are mapped and legislative and regulatory developments are flagged where these may require actions to be taken in such policies and procedures.

The PwC Legal Team behind Rule Scanner are proud recipients of ALM Law.com’s coveted “2024 Disruptive Technology of the Year Award” and the “2025 Regulatory, Governance and Compliance Technology Award in 2025”.

If you would like to discuss any of the developments mentioned above, or how they may affect your business more generally, please contact any of our key contacts or PwC Legal’s RegCORE Team via de_regcore@pwc.com or our website.