2019/5780
The TABC student was panicked. We had been learning Mishnah Bava Metzi’a and we began the fifth Perek which elaborates on the Ribbit (interest) prohibition. We set forth the basics about Ribbit.
Ribbit Basics
We began by noting that the Torah (Devarim 23:20-21) prohibits Ribbit between Jews. However, it does permit Ribbit when lending to a non-Jew. We noted an explanation I heard long ago from Rav Yehuda Amital, the founding Rosh Yeshiva of Yeshivat Har Etzion.
There is nothing morally wrong with charging a reasonable rate of interest. After all, the financial role or function of wealth is to generate more wealth. When one lends money his wealth is held dormant and is not able to create further wealth. The borrower, on the other hand, is able to use the money to make more money. Why, then, should not the lender be morally entitled to a reasonable rate for allowing his counterpart the potential to generate wealth?
However, we fellow Jews are brothers, as the Torah explicitly states in this context. One acts differently with family than with those outside one’s family. For example, one would happily host a family member for months on end if necessary, whereas he would not necessarily do this for someone outside his family.
Similarly, we are expected to extend interest free loans to our fellow Jews in need. Indeed, Hebrew free loan societies have existed on every Jewish community worthy of being called a Jewish community in every generation. This is part of the familial responsibility we have towards each other.
Of course, the Gemara (Gittin 61a) instructs us to support non-Jewish poor along with the Jewish poor. However, the scope of the responsibility we have towards our Jewish family members extends beyond that which applies to those who are not part of the family.
Most interestingly, the prohibition to lend money to a Jew with interest does not apply to non-observant Jews according to many Rishonim (see Tur and Shulchan Aruch Yoreh Dei’ah 159). According to this approach, the Ribbit prohibition is a means by which we foster a sense of brotherhood amongst our fellow Torah observers. It is a way through which we help each other live a Torah life. Thus, someone who is not part of the brotherhood of Torah observers might not be due the benefit of having an interest free extended to him. It should be noted that this view was not accepted by Rashi, and Rama recommends that no interest should be charged to non-observant Jews.
Heteir Iska
I also told the students that for centuries, we have been using a Heteir Iska, a mechanism which sidesteps the prohibition to lend with interest. The following are two examples of a contemporary version of a Heteir Iska:
Star-K Heteir Iska
HETTER ISKA / BUSINESS AGREEMENT (To be Processed in Conjunction with Mortgage or Loan Form) Date: _____________ We, the undersigned have agreed that the monetary agreement between us is a business investment in accordance with the terms outlined by Rabbi Mendel, of blessed memory, as detailed in Nachalas Shivo Chapter Forty. __________________ (the Investor) has invested the sum of $___________ with ____________________ (the Recipient) to be paid back, plus profit, as was mutually agreed upon by us. We have agreed to a condition that if __________________ (the Recipient) will give ______ % of the money deposited in his charge per year to _________________ (the Investor), the Investor shall have no further claim to the rest of the profit. The Recipient has been given a wage for his labor. We have further agreed to use the terms loan, bond, interest or mortgage on this investment in order to expedite the collection of the funds invested and of the profit due to the Investor, through the courts, should the Recipient prove delinquent in paying the same according to this agreement. The Hetter Iska shall be binding, continuing in nature, and in force between the parties unless revoked in writing and mailed, Restricted Delivery Certified Mail, to all parties to this document. ____________________________ Signature of Investor ______________________ Witness ____________________________ Signature of Recipient ______________________ Witness
Beth Din of America Heteir Iska
SHTAR ISKO Agreement Concerning Interest on Loan
Introduction
Jewish Religious Law strictly prohibits the paying or receiving of interest on loans made between Jews. However, when monies are advanced in the course of a business transaction, an agreement may be entered into, whereby the provider and receiver of these funds are considered equal partners. This partnership is based upon the stipulation that, upon request, every loss must be attested to by two trustworthy witnesses, and all profits verified by oath. All consequent profits and losses are then equally shared. However, in order to avoid these very stringent requirements, the provider of the funds, under this “Shtar Isko”, agrees to waive his share of the profits in lieu of receiving a fixed percentage of the money advanced. This percentage is then considered profit, rather than interest on a loan. This agreement becomes effective when the receiver of the funds executes a form as set below.
The Agreement
I, the undersigned, have received from __________________________________, the sum of ____________ repayable over ______ years for the purpose of transacting business in connection with __________________________________ in which profits and losses are to be equally shared. However, the said ____________________________ has agreed that in lieu of such sharing of profits and losses, which would require substantiation of all losses by two trustworthy witnesses, and verification of all profits by oath, he shall accept my payment of an annual percentage of ______% of the said sum of ____________ and waive all other profits which may be earned from the advanced funds. I have received a token payment of $1.00 from the said _________________________ for my efforts in connection with this undertaking, and have signed herewith the receipt of the said $____________. SIGNED THIS ______ day of _______________ at _______________________________. _____________________________________ Recipient’s Signature
While the Star-K and Beth Din of America’s documents are not identical (and it is worth delving into the differences, on another occasion), the basic idea emerges from both texts. The Heteir Iska, in sum, transforms a loan into an investment or business venture. No longer are the parties defined as borrower and lender; instead, they are investor and recipient. Interest is not paid. Rather, the investor receives a return on his investment.
I devoted my Torah learning of the year 5752 to Hilchot Ribbit at the Yeshiva University Yadin Yadin Kollel. The overarching principle that emerged from those many hours of learning Hilchot Ribbit is that so much depends on how one structures a deal. If one structures the interaction as a loan, it is a loan, and if one structures the arrangement as an investment, it is an investment.
Use and Misuse of a Heteir Iska
I informed the students that the Torah Temimah (VaYikra 25:36) explains why a Heteir Iska does not run afoul of the spirit of Torah law. The interest prohibition is intended to facilitate our helping each other in a time of need. However, if someone is borrowing due to the economic advantages of doing so, then the spirit of the Ribbit prohibition does not apply. In such a case, the formal Halachah remains in effect, of course, but this may be sidestepped by the use of a Heteir Iska. In such a case, the Heteir Iska confirms to both the letter and spirit of Halachah.
By contrast, lending with interest and using a Heteir Iska in a case when the borrower is in desperate need of a loan, while in technical conformity with Halachah, is not in line with its spirit.
The following story helps illustrate an appropriate and misappropriate use of a Heteir Iska. I sat on a Beit Din a number of years ago where the following case was adjudicated concerning a Heteir Iska. A certain gentleman from a large Orthodox community offered loans at unreasonably high interest rates to borrowers who otherwise could not qualify for a loan at a more conventional source.
The lender defended his behavior noting that he had executed a proper Heter Iska with the borrower. The Beit Din, however, excoriated the lender, noting that while he may have satisfied technical Halachic requirements, he was in grievous violation of the spirit of Halachah (Ru’ach Halachah; see, for example, Mishna Shevi’it 10:9).
The Heteir Iska is appropriate when used to finance a business venture and very inappropriate to use as a tool to exploit financially disadvantaged individuals. Such action was deemed by the Beit Din to fall into the Ramban’s celebrated category of a “Naval BiReshut HaTorah”, a scoundrel who acts within the technical boundaries of Torah (VaYikra 19:2).
Interestingly, all Israeli banks execute a Heteir Iska Kelali, which states that all transactions between Jews and the bank operate on the basis of a Heteir Iska. I have seen such documents posted on the walls of quite a number of branches of Israeli banks. While many Halachic authorities have questioned the Halachic efficacy of such documents, in practice it is widely accepted.
The Agudas Yisroel Rabbanim Pronouncement
I subsequently shared with the students a ruling from the Rabbanim of Agudath Israel synagogues:
AGUDAH RABBONIM HALACHIC BULLETIN - April 23, 2018
Quicken Loans (QL), a leading mortgage lending institution in the USA, is Halachically under majority Jewish ownership. Upon thorough investigation, prominent leading Halachic authorities have issued a P’sak that any Jew who obtains a loan with interest from QL or any of its subsidiaries [i.e. Rocket Mortgage] is in danger of transgressing the prohibition of Ribbis D’oraisa. We therefore feel compelled to alert the public to the P’sak of Gedolei HaRabbonim which states unequivocally that it is forbidden Al-Pi Torah for any Jew to take a mortgage or any other form of loan from Quicken Loans or its subsidiaries – or any other Jewish-owned lending institution – without a valid Heter Iska.
The Scope of the Ribbit Prohibition
We then learned the Mishna (Bava Metzi’a 5:12) which sets forth the scope of the Ribbit prohibition. The prohibition, surprisingly, does not devolve solely upon the lender, but even upon the borrower as well. Moreover, anyone who facilitates the loan, such as a guarantor, witnesses, or even a scribe, violates the prohibition (or at least the prohibition of Lifnei Iveir, facilitating another individual’s sin).
The contemporary analogue of the scribe for a loan is the attorney. Without the assistance of an attorney, most large loans, especially mortgages, would not be transacted. Thus, it is clearly forbidden to serve as an attorney for an interest-bearing loan that violates the Issur (prohibition) of Ribbit.
At that point, a student raised his hand in panic, noting that his father works as an attorney for Quicken Loans. He asked if his father routinely violates the Issur Ribbit on the basis of what we learned.
Conclusion of Part One
Quicken Loans, recognizing the business ramifications of the announcement of the Agudah, signed a Heter Iska on June 8, 2018. 1 This rendered the issue moot in many minds, but as we have already mentioned, the acceptability of a blanket Heter Iska is not unquestioned. In any event, there transpired a period of a month and a half between the announcement of the Agudah and the signing of the Heter Iska. Would there be any possible Halachic justification for dealing with Quicken Loans or Rocket Mortgage during that interim period?
Next week, IY”H, we will discuss an incisive Teshuvah by Rav Asher Weiss on this subject, in which he attempts to resolve the issue by redefining the Halachic status of a corporation.
1 Quicken Loans makes it kosher for Orthodox Jews to take out a mortgage. (2018, June 11). Retrieved from https://www.jta.org/2018/06/11/united-states/quicken-loans-makes-it-kosher-for-orthodox-jews-to-take-out-a-mortgage.