Unfair mortgage terms: the Court of Justice allows ex officio set-off, subject to strict limits

The reference

The Polish dispute concerned a foreign-currency mortgage containing terms held to be unfair. The consumers sought repayment of the sums paid under the invalid agreement.

The referring court contrasted the balance theory, under which only payments exceeding the capital advanced are recoverable, with the two-claims theory, under which each party pursues its own independent restitution claim. The choice also affects default interest, limitation periods, costs and the effectiveness of consumer protection.

The Court’s ruling

EU law does not, in principle, prevent a national court from setting off the parties’ reciprocal restitution claims of its own motion. Under that model, the consumer may recover the amount by which total payments exceed the capital advanced, together with default interest on that excess.

Directive 93/13 does not require Member States to adopt the two-claims model. Restitution remains governed by national law, subject to equivalence and effectiveness. The ruling is one of compatibility, not an EU-wide command to use the balance theory.

Mutual restitution

Invalidation must restore the consumer to the legal and factual position that would have existed without the unfair terms, but restitution operates for both parties. The consumer may recover undue payments and the bank may recover the capital actually advanced.

Consumer protection must not produce unjust enrichment. Conversely, the bank may not obtain additional remuneration for the use of capital where the agreement was invalidated because of unfair terms.

Default interest on the excess

Where national law permits ex officio set-off, the consumer must retain default interest on the portion of payments exceeding the capital received. Set-off cannot deprive the remaining consumer claim of the interest provided by law.

Prior information and adversarial process

The court must objectively and fully inform the consumer of the legal and financial consequences of invalidating the agreement. If national law connects invalidity with ex officio set-off, that consequence must also be disclosed before the ruling.

Once properly informed, if the consumer does not oppose invalidation, the Court considers that set-off is not contrary to the consumer’s intention or the adversarial principle.

Limitation periods and costs

Restitution claims presuppose invalidity. It remains for the national court to determine domestic limitation rules and interpret them consistently with the directive, without acting contra legem.

Procedural costs also remain governed by national autonomy, but their allocation must not deter consumers from exercising EU rights.

No automatic rule for Italian proceedings

The judgment is relevant to Italian banking disputes but must be applied cautiously. It does not require every national court to set off the bank’s and consumer’s claims of its own motion; it merely finds that such a mechanism is not inherently incompatible with Directive 93/13.

Italian cases therefore require examination of substantive set-off rules, party initiative, pleadings and defences, the relief sought, liquidity, enforceability and homogeneity of claims, limitation, interest and the adversarial process.

Practical consequences

Consumers and their lawyers should separately quantify all payments, capital received and accrued interest before assessing any set-off. Banks must still plead their defences and restitution claim in a timely and procedurally correct manner.

The court must ensure that the consumer understands the consequences of invalidity and that the chosen solution preserves effective and deterrent protection against unfair terms.

Conclusions

Case C-510/25 confirms that Directive 93/13 does not impose a single model for restitution following invalidation of a mortgage.

National law may allow ex officio set-off, but only in accordance with domestic rules, adversarial process and prior information to the consumer. The balance theory is therefore not an automatically applicable EU rule.