Greek courts are increasingly limiting the enforcement powers of loan servicers, ruling that creditors cannot pursue aggressive foreclosure measures while negotiating debt restructurings or seize assets whose value is grossly disproportionate to the debt owed.
The decisions mark a significant development in Greece's post-crisis financial system, where loan servicers have become central to managing the legacy of bad loans accumulated during the country's sovereign debt crisis. Acting on behalf of banks and investment funds that acquired nonperforming loans at steep discounts, servicers have broad authority to pursue delinquent borrowers. Recent court rulings suggest that authority is subject to meaningful judicial limits.
The emerging body of case law is anchored in Article 281 of Greece's Civil Code, a long-standing provision that prohibits the abusive exercise of legal rights when it exceeds the standards of good faith, accepted business practice or the social and economic purpose of those rights. Judges have increasingly relied on the provision to invalidate payment orders, property seizures and foreclosure auctions that they consider unnecessarily punitive or inconsistent with a creditor's own conduct.
One of the clearest examples came in Decision 436/2026, in which the Piraeus Court of Appeal held that a loan servicer acted abusively by obtaining a payment order against a borrower while negotiations over a restructuring agreement were still underway. The discussions had already produced a signed restructuring agreement, leading the borrower to reasonably believe that legal enforcement would be suspended while the parties worked toward implementation.
The court concluded that pursuing enforcement against a borrower who had cooperated throughout the restructuring process violated the principle of good faith. It upheld the cancellation of the payment order and emphasized that banks and loan servicers, as financial institutions operating under heightened regulatory obligations, are expected to exercise their rights with restraint and proportionality.
The judgment also underscored that creditors should not immediately terminate loan agreements when borrowers experience temporary financial difficulties if a reasonable delay would not materially prejudice the creditor's interests.
Where immediate enforcement would cause severe financial harm while offering little practical benefit to the lender, courts may view such action as abusive. Those expectations are reinforced by the Bank of Greece's Code of Conduct for borrowers in arrears. The framework requires creditors to follow a structured resolution process before terminating a loan, including contacting the borrower, assessing financial information and considering restructuring proposals. While non-compliance with the code does not automatically invalidate enforcement measures, it can strengthen claims that a creditor has acted abusively under Article 281.
Courts also examine whether borrowers have cooperated by maintaining communication, disclosing their financial circumstances and participating in restructuring discussions. Where negotiations are ongoing, judges have increasingly viewed parallel enforcement actions as incompatible with the duty of good faith.
A second line of decisions has focused on proportionality, with courts scrutinizing attempts to auction properties worth many times more than the underlying debt. Greek judges have held that creditors should employ the least burdensome means reasonably capable of recovering what they are owed, particularly when alternative assets or less intrusive enforcement measures are available.
The principle was articulated by Greece's Supreme Court in a landmark 2017 ruling. In that case, a creditor seeking to recover approximately €528,000 simultaneously seized real estate valued at more than €1.78 million as well as a separate claim worth roughly €784,000. The court found that the combined value of the assets subjected to enforcement was manifestly disproportionate to the outstanding debt and exceeded what the borrower could reasonably be expected to sacrifice.
More recent decisions have applied the same reasoning. In Decision 111/2026, the Athens Court of First Instance annulled a foreclosure after finding that the debt represented only around one-tenth of the property's market value. The court also attached weight to the fact that the property served as the borrower's primary residence.
In another case, a court on the island of Syros blocked enforcement after a loan servicer pursued multiple recovery measures simultaneously, including the seizure and auction of four properties, the freezing of bank accounts and the liquidation of pledged securities. The court concluded that the cumulative enforcement action was excessive in relation to the amount outstanding.
The rulings stop well short of preventing creditors from foreclosing whenever a property's value exceeds the debt. Greek courts have consistently held that some disparity is inevitable. Judicial intervention has generally been reserved for cases where the imbalance is clear and substantial, particularly when creditors target high-value assets despite the existence of alternative property or enforcement options that would satisfy the claim with less harm to the borrower.
