Mortgage loans and unfair terms: can the consumer combine limitation and set-off?

Disputes concerning mortgage loans granted to consumers remain numerous, particularly where the contract contains unfair terms. A procedural question often arises in practice: can a borrower who raises limitation (prescription) against the bank also invoke set-off (compensation) between reciprocal claims without losing the benefit of that limitation?
In a judgment of 11 December 2025, the Court of Justice of the European Union gave a clear answer, which strengthens consumer protection and directly concerns those involved in property financing.

1. The previous legal framework: limitation, set-off and unfair terms

Under French law, extinctive limitation (prescription extinctive) extinguishes the creditor's right to bring an action once a certain period has elapsed (Article 2224 of the French Civil Code). It does not extinguish the claim itself, but bars its recovery through the courts.
In credit matters, the consumer benefits from specific time limits, notably the two-year limitation period provided for by Article L. 218-2 of the French Consumer Code for actions brought by professionals against consumers. The operation of this two-year period with regard to the lender of a sole trader in compulsory liquidation is examined in our article on the declaration of claims and the unseizable main residence.

Set-off, for its part, allows two parties' debts to be extinguished reciprocally (Article 1347 et seq. of the French Civil Code). It requires claims that are certain, liquidated and due. The interaction between set-off and a time-barred claim is also examined, in a leasing context, in our article on the deduction of a time-barred occupation indemnity from the security deposit.

Lastly, where the credit agreement contains unfair terms, those terms are deemed unwritten (Article L. 212-1 of the French Consumer Code), which may lead to the annulment of the contract and give rise to reciprocal restitution claims between the bank and the borrower.

2. The contribution of the judgment of 11 December 2025

In the case decided on 11 December 2025 (CJEU, Kuszycka, Case C-767/24), the bank argued that, by invoking set-off, the consumer implicitly acknowledged that the bank's claim was due and therefore waived the limitation period that had already run.
The Court of Justice firmly rejects this analysis: invoking set-off does not amount to a tacit waiver of the limitation defence.

The reasoning follows the logic of Directive 93/13/EEC on unfair terms. The Court recalls that national procedural rules must not make it impossible or excessively difficult to exercise the consumer's rights. Forcing the consumer to choose between set-off and limitation amounts to depriving the consumer of a defence that has already been acquired.

3. Practical consequences for those involved in property credit

For landlords and investors

Even though the decision directly concerns consumer credit and mortgage lending, it recalls a structuring principle: procedural mechanisms cannot be used to indirectly neutralise consumer protection. Investors who finance their transactions through banking structures must take this litigation risk into account, particularly where contractual terms are fragile.

For borrowers / tenant-purchasers

The judgment confirms an essential strategic freedom: the consumer may invoke the limitation of the bank's claim while also raising, as a principal or alternative argument, set-off between the sums already paid and those claimed. This option considerably strengthens the negotiating position against the lender. The remedies available to individuals and businesses against a bank are set out in our article on disputes with a bank.

For property and finance professionals

Banks, intermediaries and advisers must review their litigation analyses. A strategy based on implicit acknowledgement of debt becomes more uncertain. Vigilance is required when drafting contracts and when handling disputes relating to older mortgage loans.

Several risks clearly emerge:

• Civil liability of the lender where unfair terms have led to the annulment of the contract (Article 1240 of the French Civil Code);
• Mass litigation on older loans, notably index-linked loans or loans denominated in foreign currencies;
• Partial or total nullity of the credit agreement and restitution of the sums received;
• Increased evidentiary and financial difficulties for banks where limitation has been acquired.

In short, the decision of 11 December 2025 forms part of a consistent trend towards strengthening consumer protection in mortgage lending. It recalls that limitation and set-off are two distinct mechanisms, which may be invoked cumulatively without implicit waiver. In an increasingly demanding legal environment, both borrowers and property professionals have an interest in seeking assistance to secure their contractual and litigation strategies. Early analysis often makes it possible to avoid long and costly disputes or, failing that, to approach them from a sound legal position.