EVERYDAY CASES INVOLVING INTEREST

Although the Biblical prohibition against charging interest (ribbis) on a loan is well-known, few people are aware of the many applications and ramifications of the laws of interest. Transgressing these laws could result in the violation of up to six negative commandments according to the Rambam(1), so it is imperative that we examine some everyday situations where the laws of interest apply.

SOME FORBIDDEN FORMS OF BORROWING:

A loan may not be made with conditions which will benefit the lender. He may not stipulate that in exchange for the loan, the borrower should patronize him, refer others to his or another person's business(2), be given a job(3), or make a donation to tzedakah(4). It is permitted, however, to lend money with the stipulation that the borrower will accept a job offer or take a course, etc., if the lender's aim is solely to benefit the borrower or to ensure that his loan will be repaid(5).

It is forbidden to lend money to a handyman on condition that he will work for the lender at a lower wage(6).

It is forbidden to borrow another person's credit card to make a purchase on which the borrower makes monthly payments with interest. Similarly, it is forbidden to borrow another person's credit card to obtain a cash advance. These transactions are forbidden because legally, the owner of the card is responsible for the payments. In effect, it is as if the borrower is borrowing money from the credit-card owner and then repaying him the principal plus interest(7).

It is permitted to borrow another person's credit card (when no interest is paid) even though the credit-card owner benefits from the borrower's purchase by earning mileage, etc.(8).

It is forbidden to lend money on condition that the borrower will (at a later date) lend the lender money for a longer period of time or a larger amount of money than the present loan entails. It is debatable if the lender can make that type of condition if the amount of money and time will be the same as those of the present loan(9).

It is forbidden to charge extra money for a post-dated check, since the person issuing the check is actually paying interest for the privilege of delaying payment.

A form of ribbis of which many people are not aware is the case of two people agreeing to an uneven exchange of jobs or chores. For instance, a teacher should not say to a colleague, "I will teach your period if you will teach mine" ??if the two periods being exchanged are not exactly equal, both in the length of time and in the difficulty of work entailed(10). Similarly, one may not say to his friend, "I will paint your house if you will paint mine," if the two houses are not exactly even in size and in the amount of work involved(11).

It is forbidden to tell someone, "Have a meal with me, since I ate at your house last week." This appears to be payment of debt, and since one might give his friend a more elaborate meal than the meal he received, it may be perceived as ribbis. Some poskim(12), however, permit saying, "Come to my house for lunch, and I'll eat lunch at your house next week", while other poskim prohibit this as well(13).

Note: It is important to remember that in some of the cases in which it is prohibited to charge interest, a heter iska (a partnership agreement) can be drawn up by a competent rabbinic authority which allows the transaction to be carried out in a halachically permissible manner.

SOME FORBIDDEN FORMS OF REPAYMENT:

The prohibition of ribbis is not limited to monetary payments. A favor or a benefit of any sort which the lender receives from the borrower may fall into the category of interest. There are several basic rules which govern the extent of this prohibition:

a. A borrower may not extend a favor to a lender just because he got a loan from him. If the borrower would not have done the favor otherwise, it is forbidden to do the favor.

b. The borrower may not do a favor for the lender in public even if he would have done the favor regardless of the loan.

c. When the relationship between a borrower and a lender is long established and the borrower has previously granted public favors to the lender, such a relationship may continue even after a loan takes place.

SOME APPLICATIONS OF THESE RULES:

A borrower may not praise(14) or bless(15) a lender for lending him money or for extending a payment deadline. Some poskim even prohibit saying a simple thank-you(16), while others allow a simple thank-you(17).

A borrower may not buy a lender an aliyah in appreciation for a loan(18). A borrower may not send mishloach manos to a lender(19), tutor a lender or his child in the study of Torah without compensation(20), offer him charity(21), sell him goods or offer a service below market price,(22) or buy goods from him or pay him for a service above market value(23), unless he would have done so regardless of the loan.

A borrower may invite a lender to a wedding even if he would not have invited him were it not for the loan(24).

Institutions, e.g., yeshivos, shuls, etc. may honor an individual who has loaned them money, provided that the honor was not a condition for granting the loan(25).

It is permitted for a borrower to give a wedding gift to the son or daughter of a lender(26), even if he would not have given a gift were it not for the loan. The gift must be an item which the groom's/bride's father would not normally purchase for his child(27).

A borrower may extend to a lender a common courtesy, such as changing money for him. A lender, though, may not (strongly) request a favor from a borrower, even if it is merely a common courtesy(28).

Note: All non-financial benefits and favors are prohibited only while a loan is outstanding. Once a loan is repaid, this type of ribbis prohibition no longer applies(29).

FOOTNOTES:

1 Hilchos Malveh v'Loveh 4:2. See also Sefer ha-Mitzvos (Shoresh 6).

2 Y.D. 160:23; Igros Moshe Y.D. 3 Hilchos Ribbis 160:18.

3 Shulchan Aruch Harav, Ribbis 14.

4 Rama Y.D. 160:14 (concerning hekdesh). R' Akiva Eiger adds that it is also prohibited to say, "I will lend you 100 if you will return 102 to hekdesh".

5 Questions of Interest, pg. 45.

6 Shach Y.D. 160:37.

7 Mishnas Ribbis 17:7 based on Y.D. 168:17. See also Igros Moshe Y.D. 3:42 and ha-Mesivta, 1998, pg. 374-379. Sometimes, the borrower promises to make payments within the grace period and then fails to honor his commitment, leaving the credit-card owner with the interest payments. See Mishnas Ribbis who discusses a way for the lender to be compensated in such a case.

8 Since the points are awarded by the credit-card company, not by the borrower.

9 Rama Y.D. 160:9.

10 If, however, the work itself is comparable but the wages are not (for reasons of seniority, etc.) they are permitted to switch; Toras Ribbis, pg. 227.

11 Y.D. 160:9. Partners, however, may divide their work in any way they choose and exchange their obligations at any time; Chasam Sofer Y.D. 135.

12 Rama O.C. 170; Aruch ha-Shulchan O.C. 170:14.

13 Taz quoted by Mishnah Berurah 170:32.

14 Nor may he greet him in a warmer or more gracious manner then he had previously greeted him; Y.D. 160:11.

15 Even expressions like ye'yashar kochachem or tizku l'mitzvos are to be avoided; see Birkei Yosef 160:12, Minchas Shelomo 27 and Bris Yehudah 11:29.

16 Igros Moshe Y.D. 1:80. A possible solution is to thank him for his effort in making the loan.

17 Harav S.Z. Auerbach (Minchas Shelomo 27); Harav Y.S. Elyashiv (Mishnas Ribbis 4, note 21); Harav Y. Roth (Questions of Interest, pg. 61).

18 Shach Y.D. 166:1. If the lender is called to the Torah and he then realizes that the aliyah was bought for him by the borrower, he need not walk away from his aliyah (Harav S. Wosner, Kol ha-Torah, vol. 42, pg. 228).

19 Mishnas Ribbis 3, note 18.

20 Y.D. 160:10.

21 Shulchan Aruch Harav 14.

22 Shach 160:37.

23 Shach 173:6.

24 Harav Y. Roth and other poskim quoted in Questions of Interest (pg. 57). Several reasons are given: 1. The invitation is in recognition of their present social friendship, not an expression of appreciation. 2. A wedding invitation is not a public honor. 3. A wedding host considers the food as a gift to his guests.

25 Based on Y.D. 160:18.

26 A bar/bas mitzvah gift may be given only after the child's birthday has passed, since prior to his birthday, the item will belong to the father, who is the lender.

27 Bris Yehudah, pg. 227.

28 Y.D. 160:12, Shulchan Aruch Harav 10. See Darkei Teshuvah 80 and Bris Yehudah 11:14.

29 Birkei Yosef Y.D. 160:11. See Yabia Omer Y.D. 4:9.