Some Aspects of the Halachos of Ribbis
Question #1: Small Thanks
“May I give a small present of thanks to someone who helped me out with a loan?”
Question #2: Doing a chesed
“Can I violate ribbis by doing a chesed?”
Question #3: Lending my Credit Card
“How can you violate ribbis by letting someone use your credit card?”
There are a total of six different prohibitions that can be violated when creating and paying a loan in which there is interest. Someone who loans money for interest is in violation of the Torah’s prohibition, even before any interest is, indeed, charged or collected (see Bava Metzia 62a; Shu”t Mahar”a Sasson #162).
According to the Mishnah, not only do the borrower and the lender violate the prohibition against ribbis, but the witnesses to the loan, the co-signer on the loan and the scribe who writes up the loan document are also in violation of the prohibition (Bava Metzia 75b). Thus, anyone causing the loan to be finalized is in violation of this mitzvah. This would include someone who notarizes a loan document that includes a ribbis provision, and might even include a lawyer who draws up a document that includes provisions for ribbis (Bris Yehudah 1:6).
The halachos of ribbis are quite complex, and a review of some of the halachos is always in order. From my experience, even seasoned Torah scholars make mistakes about these halachos and may even have business activities that violate the prohibition of ribbis. What makes these matters even more regrettable is that virtually every one of these situations can be alleviated easily by usage of a heter iska, which will be explained later in this article.
Chazal were so concerned that someone would violate the prohibition of ribbis that they wanted the lender to gain no perceived advantages from the loan, even when the gains are completely of a non-monetary nature. Thus, the lender may not ask the borrower to do him a favor that he would not have asked had he not loaned him money (Tosafos, Bava Metzia 64b s.v. Avol). Similarly, the borrower may not invite the lender to his simcha, if he would not have invited him otherwise. It is even prohibited for the borrower to thank the lender for the loan (Graz, Hilchos Ribbis #9).
Chazal also prohibited ribbis that occurs before or after the loan exists. For example, it is prohibited for the borrower to bring a small gift to the lender, as a token of thanks for the loan (Mishnah Bava Metzia 75b). This is prohibited, even after the loan has been paid off, and even many years later.
Ribbis Without a Loan
The halacha prohibits charging for the use of one’s money, even when a loan did not actually take place. Thus, a merchant may not add interest charges to a bill (sent to a Jew), because it is past due. He is permitted to bill for the actual expenses accrued due to his having had to send an additional bill, as well as any other collection costs he incurs. However, the merchant may not add service charges because he was forced to borrow money off his credit line to cover the shortfall.
The prohibition against charging for delay of payment also applies to acquisitions. Thus, a store may not charge one price for cash and a different price for credit or delayed payment.
The borrower may pay a co-signer to guarantee a gemach loan. In a situation where the borrower defaults and the co-signer has to pay off the loan, the co-signer may collect what he paid from the borrower (Taz to Yoreh Deah 170:3).
When neighbors borrow small items such as flour, sugar, or eggs, a loan has taken place. They may not intentionally return more than was borrowed, which would be considered ribbis. However, if they are uncertain exactly how much flour or sugar they borrowed, they are permitted to return enough to be certain that they have definitely returned as much as they borrowed (see Bava Metzia 75a). One may return an item that is similar, but not identical, to what was borrowed, if the buyer and seller are not concerned about the difference. Thus, one who borrowed a loaf of bread of one brand need not be concerned whether the loaf of bread that he returns is the same brand or the identical size (Rema, Yoreh Deah 162:1). Similarly, one need not be concerned that the price may have fluctuated in the interim (Shaar HaTziyun 450:4). .
Ribbis Without any Benefit to the Lender
The Torah prohibits ribbis if the borrower pays more than he borrowed, even when no benefit is gained by the lender.
An actual case will show us how people can be guilty of this violation without realizing it. Reuvain is involved in many chesed projects, including raising money for tzedakah. Yankel had an excellent business opportunity and asked Reuvain to help him finance his new endeavor, of course in a permitted fashion. Reuvain decided that he would rather utilize this opportunity for a different mitzvah. He tells Yankel, “Instead of becoming a partner in your business, I will lend you the money interest free, but I’d like to make a condition that some of the maaser from the profits goes to support a yeshiva.”
Reuvain assumes that by making the arrangements this way, he fulfills the mitzvah of lending someone money, which, indeed, is a big mitzvah of chesed, and, in addition, he will be causing someone else to give tzedakah, which is also a tremendous mitzvah. Unfortunately for both Reuvain and Yaakov, since giving the tzedakah was a condition of the loan, this arrangement incurs a Biblical prohibition of ribbis. Although the lender, Reuvain, does not gain from the loan, since a condition of the loan was that Yankel pay more money than he borrowed, this is considered a Torah violation of ribbis (Rema, Yoreh Deah 160:14). (In this instance, there would be no violation of ribbis if he asked Yankel as a favor to donate to the tzedakah cause. Alternatively, they could arrange some form of heter iska, as will be explained later.)
Borrowing Credit or Credit Cards
Here is another instance that occurs frequently, in which people wish to do a tremendous chesed but in reality they are involved in a serious infraction of ribbis. Mrs. Friedman and Mrs. Goldstein meet at a closeout sale where top quality mattresses are available at an unbelievable price. Members of Mrs. Friedman’s family need new mattresses, and she realizes that by purchasing them at the closeout prices she will be saving hundreds of dollars.
Unfortunately, Mrs. Friedman does not have the money to purchase the mattresses, nor does she have any credit cards at her disposal. As she is bemoaning the fact that she will have to forgo this opportunity to save so much money, Mrs. Goldstein, always eager to do a chesed, offers Mrs. Friedman to charge the mattresses on her credit card. A very grateful Mrs. Friedman gladly takes up the opportunity and purchases the mattresses. Her intention is to make the credit card payments accrued to Mrs. Goldstein’s card until she can pay off the balance and interest for the mattresses.
Without either lady realizing it, they have now created a major halachic problem. The credit card company did not lend the money to Mrs. Friedman, but to Mrs. Goldstein, whose name is on the card. For this reason, what has transpired here is that two loans have taken place, both with interest: one from the credit card company to Mrs. Goldstein, and a second from Mrs. Goldstein to Mrs. Friedman. If Mrs. Friedman makes payments directly to the credit card company, she will be repaying Mrs. Goldstein’s loan to the credit company and her own loan to Mrs. Goldstein simultaneously. Thus, she is now paying her loan to Mrs.Goldstein with interest and both well-meaning ladies will have violated the laws against ribbis (Shulchan Aruch Yoreh Deah 168:17). The parties involved should immediately consult a halachic authority who understands the halachos of ribbis well, since there are several ways that the situation described above can be rectified. (The different ways to alleviate the problem might depend on the individual’s circumstances, and are beyond the scope and length of this article.)
A similar problem often happens in a business partnership, in which one partner has access to a credit line and borrows money from the credit line for the benefit of the business. Since the credit line is in his name and not that of the business, without realizing it, he has borrowed money from the bank and then loaned it to the business, in which he is only one partner. Thus, he is now considered to be charging his partners for interest on a loan he has made to them. Again, this problem can be alleviated with a heter iska.
What is a heter iska?
A heter iska is a halachically approved way of restructuring a loan or debt so that it is some form of business deal that is not a loan. There are numerous ways of making a heter iska, and, indeed, different situations call for different types of heter iska. It is important for everyone who is involved in any type of business dealings to understand the fundamental principle of every heter iska: That a heter iska restructures the loan so that it is an investment or acquisition, rather than a loan.
Borrowing from Jewish-owned banks
Many people borrow money from banks, mortgage companies, credit card companies (including stores), brokerages, and credit unions, without verifying whether they are owned by a Jewish controlling interest. Without using a heter iska, it is forbidden to borrow money with interest from any Jewish-owned business, even if it is incorporated. Although there are some poskim who permit lending money to a corporation without a heter iska, as will be explained later in this article, this author is unaware of any posek who permits borrowing from a Jewish-owned corporation, without a heter iska.
Rav Moshe Feinstein ruled that it is permitted to lend money to a Jewish-owned corporation, without incurring a problem of ribbis. In Rav Moshe’s opinion, a loan must have an individual who is responsible to pay for it. When a corporation borrows, no individual is responsible to pay for the loan. Therefore, Rav Moshe contends that a loan to a corporation does not incur the prohibition of ribbis, provided that no individual personally guarantees the loan (Shu”t Igros Moshe, Yoreh Deah 2:63). It should be noted that many other poskim do not agree with this lenience of Rav Moshe, contending that there can be ribbis even when a corporation borrows money (see extensive discussion in Bris Yehudah pg. 138). One practical difference is that, according to Rav Moshe, it is permitted to have a savings account in a Jewish-owned bank without having a heter iska, whereas, according to the other opinions, it is forbidden. However, according to all opinions it is forbidden to borrow from a Jewish-owned bank, credit union or brokerage without a heter iska. Thus, one may not buy stocks on margin from a Jewish-owned brokerage without a heter iska.
Hashkafah of Ribbis
The mitzvah of Ribbis poses an interesting hashkafah question. Why does the Torah forbid making a profit from my money? The Torah encourages earning a livelihood, so what is wrong with earning a profit from lending out money?
Many answers are offered to this question. Kli Yakar presents the following approach: When a farmer plows and plants his field, he knows well that if it does not rain sufficiently or if a blight attacks his crop, he will have nothing to show for his efforts. Thus, even with all his hishtadlus, he knows that he must daven for Hashem to help his efforts. Similarly, a person who opens a business knows well that even with all his planning, his business may not be successful. Thus, he also knows that he must daven for Hashem to help his efforts. However, someone who makes his parnasah from lending out money seems to have his entire livelihood totally secure. He has no daily reminder forcing him to pray for his daily livelihood. For this reason, explains the Kli Yakar, Hashem did not want a person to make his livelihood this way. By banning this method of parnasah, the Torah forced a person to make parnasah in a way that he must be reminded daily of his need for Hashem’s help.