It's been going on in the EU for years. Microsoft and Sony will both damage your console if you break certain rules, permanently banning it from online services. Not just your account or you personally, the actual console. Given that these days online is often essential to the game, and many game purchases are online only, the console is basically useless and worthless afterwards.
There is no appeal process. And of course they do make mistakes.
I have heard that some people have been able to return their consoles to the retailers in the UK, but only Reddit posts so no idea if it is true or not. Legally it is a grey area because it hasn't been tested. People were able to partial or full refunds on the PS3 when Sony removed Linux support via a mandatory (to keep playing games) update, but that's a bit different. If someone did go to court it would be against the retailer, as the consumer rights make them responsible for the product, and they would have a very hard time getting Sony to assist them with detailed evidence to back up the console ban. But then again, the consumer might find it difficult to provide any evidence that they were innocent. It would probably come down to the judge and how much effort the retailer made to defend.