Court of Justice of the European Union clarifies obligations of bankruptcy courts to assess unfair contract terms in consumer insolvency proceedings

RegCORE Client Alert | Financial Services

QuickTake

On 3 July 2025, the Court of Justice of the European Union (CJEU) published its judgment in Case C-582/23 (Wiszkier) (the Judgment). See press releaseShow Footnote The case arose from a Polish context involving a consumer who had entered into a mortgage loan agreement indexed to the Swiss franc and was subsequently declared bankrupt. The consumer had acknowledged the claims, and the list of claims was approved by the supervisory judge. However, at a late stage, the bankruptcy court identified potentially unfair terms in the underlying loan agreement. The Polish bankruptcy court applied to the CJEU for a preliminary ruling and specifically whether national rules that prevent the bankruptcy court from examining the unfairness of contractual terms—once the list of claims is final—are compatible with EU law, particularly Directive 93/13/EEC on unfair terms in consumer contracts.

Courts and tribunals of EU 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 provides significant clarification on the role of national courts in ensuring consumer protection, particularly in the context of insolvency proceedings where potentially unfair contractual terms may impact the consumer’s liabilities. 

Key takeaways from the CJEU Judgment

The CJEU interpreted the application of Directive 93/13/EEC on unfair terms in consumer contracts, particularly in the obligations of national courts in consumer bankruptcy proceedings and the ex officio i.e. own initiative examination of unfair terms in consumer contracts.   
The Judgment aims to clarify the following key points: 

1. Ex officio examination of unfair terms: The CJEU recalls the mandatory nature of Article 6(1) of Directive 93/13/EEC, which stipulates that unfair terms are not binding on the consumer. It emphasises that a judge must assess ex officio (own initiative) the unfairness of a contractual term as soon as they have the necessary elements, even within the framework of personal bankruptcy proceedings, even if the list of claims has already been approved and is binding. This obligation arises from the requirements of Council Directive 93/13/EEC on unfair terms in consumer contracts, which aims to ensure a high level of consumer protection across the EU.
2. Independence from finality of claims list: The Judgment clarifies that the binding nature of the list of claims (res judicata) does not preclude the bankruptcy court from assessing the fairness of contractual terms. The public interest in consumer protection, as enshrined in EU law, justifies such an examination at any stage of the proceedings. 
3. Limitation of national procedural rules: The CJEU found that national legislation, which restricts the bankruptcy court’s ability to assess unfair terms—by requiring referral to a supervisory judge and prohibiting interim measures—does not provide effective protection of consumer rights as required by EU law. Such procedural limitations may prolong proceedings and discourage consumers from exercising their rights, thereby making the application of EU law excessively difficult. 
4. Interim measures to protect consumers: The Judgment emphasises that bankruptcy courts must be able to adopt interim measures to ensure the effectiveness of consumer protection. For example, the court may consider reducing the amounts withheld from the bankrupt consumer’s salary pending a decision on the unfairness of the contractual terms. 
5. Consumer’s right to effective judicial protection: The consumer’s right to effective judicial protection under EU law is reaffirmed by the Judgment. A court must ensure that consumers are not discouraged from invoking their rights due to procedural delays or financial hardship caused by the ongoing enforcement of potentially unfair claims.
6. Informed consent of the consumer: The CJEU recalls that the consumer may waive the protection offered by the Directive, but only in a free and informed manner. The absence of opposition or the acknowledgment of claims without legal assistance cannot be equated with such a waiver.

The CJEU’s interpretation is binding not only on the referring court but also on other national courts and tribunals faced with similar issues, reinforcing the uniform application of EU consumer protection standards in insolvency proceedings. This Judgment underscores the primacy of consumer protection in insolvency proceedings and the need for national courts to proactively safeguard consumers’ rights under Directive 93/13/EEC.  

Key considerations 

The CJEU’s interpretation of Directive 93/13/EEC significantly clarifies and thus enhances the procedural safeguards available to consumers. In general terms, the Judgment reinforces the primacy of EU consumer protection law over national procedural rules, setting a precedent that may influence insolvency and enforcement proceedings across the EU with an impact that may reach well beyond (bankrupt) consumers’ interactions with financial services firms. Accordingly:

• Primacy of EU over national procedural rules: which are to be interpreted and, if necessary, set aside to the extent they hinder the effective protection of EU consumer rights. Member States are invited by the CJEU to adapt their legislation and practices to ensure compliance with Directive 93/13 and CJEU case law, failing which their national procedures may be set aside for being contrary to Union law. National competent (financial services but also consumer protection relevant) supervisory authorities may increase scrutiny of firms’ consumer contract practices and expect evidence of compliance with the CJEU’s interpretation of Directive 93/13/EEC.
• Impact on debt recovery and insolvency proceedings: The Judgment disrupts the traditional finality of claims lists in insolvency proceedings. Even after a claim is admitted and the list is approved, the underlying contract can be challenged on the grounds of unfairness, potentially reducing or extinguishing the claim. Firms must be prepared for the possibility of delayed recoveries and the need to defend the fairness of contract terms at any stage, including after the closure of the claims list. Credit professionals and insolvency practitioners must ensure that consumers’ rights are effectively protected at every stage of the procedure, and that any waiver of this protection is free and informed.
• Procedural adjustments and litigation risk: Regulated firms should expect increased litigation risk, as consumers (or their representatives) may raise unfairness arguments late in the process, prompting courts to reopen or reconsider claims. Firms should ensure they maintain robust documentation and legal analysis of contract terms to withstand ex officio judicial review.  The availability of interim relief to prevent undue hardship to consumers while the fairness of contract terms is under review provides further complications. As an example, if a court orders interim relief such as a reduction or suspension of payments (e.g., salary deductions or loan repayments) this may cause immediate shortfalls in expected cash inflows for firms and more difficulty in forecasting revenue. 

In respect of considerations that may be more specific to relevant financial services firms, some may wish to  reviewing their current arrangements in light of: 

1. Enhanced compliance obligations

The Judgment fundamentally raises the bar for compliance in firms engaged in consumer debt as well as  notably in terms of recovery and insolvency proceedings. The Judgment makes clear that consumer protection under Directive 93/13/EEC is paramount and that national procedural rules cannot impede the ex officio examination of unfair contract terms—even after the claims list in bankruptcy proceedings has become final. This may have several direct implications for financial services firms’ control functions:

• Ongoing review of contract terms: Legal and Compliance teams should ensure that all standard consumer contracts are regularly reviewed and updated to eliminate potentially unfair terms that can be open to challenge. This is not a one-off exercise; the risk of judicial scrutiny persists throughout the life of the contract and any subsequent enforcement or insolvency proceedings. 
• Documentation and audit trails: Firms should maintain comprehensive records demonstrating that contract terms have been assessed for fairness and that consumers have been adequately informed of their rights. This includes documenting any changes made to contract templates in response to legal developments. 
• Procedural safeguards: Compliance policies should be updated to ensure that, at every stage of debt recovery or insolvency, there are mechanisms to identify and address potential unfairness in contract terms. This may include checklists or mandatory legal reviews before claims are submitted or enforced. 

2. Training and awareness for staff

The Judgment underscores the need for robust and ongoing training for all staff involved in consumer debt recovery, insolvency and related litigation:

• Legal standards for unfair terms: Relevant staff must be trained to recognise what constitutes an unfair term under Directive 93/13/EEC and relevant national law. This includes understanding the types of clauses that are most likely to be challenged and the legal consequences of such challenges. 
• Consumer rights and judicial protection: Training should emphasise the consumer’s right to effective judicial protection, including the possibility that courts may intervene ex officio to protect consumers, even late in the process or after procedural milestones have been reached. 
• Responding to judicial scrutiny: Employees should be prepared for the possibility of courts reopening or revisiting claims based on unfairness arguments. Training should cover how to respond to such developments, including the provision of evidence and legal arguments to support the fairness of contract terms. 
• Interim measures: Staff must understand the potential for courts to order interim measures (such as suspension or reduction of payments) and the operational steps required to comply with such orders promptly. 

3. Operational adjustments and risk management

The ability of courts to impose interim measures—such as suspending or reducing payments pending the outcome of an unfairness assessment—introduces significant unpredictability into the financial operations of firms involved in consumer debt recovery and insolvency. In order to mitigate, firms should ensure that they carry out:

• Early identification of risk: Firms should implement processes to flag contracts or claims that may be vulnerable to unfairness challenges, allowing for early intervention or renegotiation where appropriate. 
• System modifications: Firms must have systems capable of quickly adjusting payment schedules, recalculating outstanding balances, and updating internal records to reflect court orders. This may require investment in IT infrastructure and process automation. 
• Sufficient resource allocation: Additional staff time and expertise may be needed to interpret court orders, communicate with affected consumers, and coordinate with legal teams to ensure compliance.
• Ongoing monitoring: Firms must track the status of each case where interim measures are in place, ensuring that any changes (such as the lifting or modification of an order) are promptly reflected in operational processes. 
• Scenario planning: Training should include case studies or simulations based on the new legal landscape, helping staff to anticipate and manage the practical implications of the Judgment. 

4. Cultural and strategic shifts

The Judgement reinforces an ever-increasing need for a consumer-centric culture that overcomes challenges arising from:

• Generic training: More targeted training should not only focus on legal compliance but also on the broader ethical and reputational considerations of consumer protection. 
• Lack of proactive engagement: Firms may need to adopt a more proactive approach in engaging with consumers, including clear communication about their rights and the firm’s commitment to fair practices. 
• Not knowing when to settle and impacts on future terms and pricing: Some firms should consider when to offer proactive settlement or renegotiation strategies in cases where the fairness of contract terms is questionable, to avoid protracted litigation and reputational risk. Equally, some firms may need to reassess the pricing and risk models for consumer credit products, factoring in an increased risk of judicial intervention and unenforceability of certain terms if these are unamended and/or repeatedly contested in individual and/or class action claims.

5. Coordination across departments

Effective responses by firms to court ordered interim measures may require (ever) close(r) coordination between legal, compliance, operations and customer service teams:

• Integrated workflows: Firms must establish clear workflows for escalating court orders, implementing operational changes and monitoring compliance with those orders. 
• Information sharing: Timely and accurate information must flow between departments to ensure that all relevant teams are aware of and can act on interim measures. 

6. Monitoring and continuous improvement

This Judgment is one of a recent number of preliminary rulings that provide pan-EU clarity on consumer protection and regulatory obligations. It is conceivable that further financial services specific supervisory expectations may be published by EU and national competent authorities in addition to scheduled legislative reforms to improve retail client and thus consumer protections in financial services. While such pan-EU harmonisation may be welcome in reducing the cost of complying with slightly differing regimes and principles across the EU, the CJEU’s efforts to clarify also introduce further complexity. 

• Regulatory developments: Legal and compliance teams must stay abreast of further legal and regulatory changes at both EU and national levels, as the Judgment is likely to prompt legislative responses and increased regulatory scrutiny. 
• Feedback loops: Firms should establish mechanisms for capturing lessons learned from litigation or regulatory interventions and feeding these back into compliance and training programs. 

Outlook

The Judgment has significant implications for insolvency practitioners, financial institutions, their supervisors as well as national courts across the EU. It mandates a more active role for bankruptcy courts in scrutinising consumer contracts and ensures that consumer protection remains central throughout insolvency proceedings. Firms and practitioners should review their procedures to ensure compliance with the requirements articulated by the CJEU, particularly regarding the assessment of unfair terms and the provision of interim measures to protect consumers.

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.