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Taking Interest: Difference between revisions
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→Heter Iska
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* "Derisha's Heter Iska": Derisha 167:1 seems to allow setting up an iska half loan and half investment which evolves into a complete loan after the iska reaches a certain percent of gain. The lender needs to pay a small amount to the borrower in order to pay him for his work investing the half investment. Then the lender can buy the "call option" from the borrower that if the investment doesn't reach the percent gain specified then the borrower will pay the difference between the actual price of the investment and the specified price. They can adjust the price of this option to a small amount. However, the Taz 167:1 points out that this approach is complete incorrect and is a violation of Biblical interest. He brings many proofs including the Rosh responsa 88:2 who explicitly rejects this idea. The Shaarei Bracha 167:1 cites the Maharam Chaviv 23 who agrees with the Taz. He also cites the Radvaz 946 who says the same. | * "Derisha's Heter Iska": Derisha 167:1 seems to allow setting up an iska half loan and half investment which evolves into a complete loan after the iska reaches a certain percent of gain. The lender needs to pay a small amount to the borrower in order to pay him for his work investing the half investment. Then the lender can buy the "call option" from the borrower that if the investment doesn't reach the percent gain specified then the borrower will pay the difference between the actual price of the investment and the specified price. They can adjust the price of this option to a small amount. However, the Taz 167:1 points out that this approach is complete incorrect and is a violation of Biblical interest. He brings many proofs including the Rosh responsa 88:2 who explicitly rejects this idea. The Shaarei Bracha 167:1 cites the Maharam Chaviv 23 who agrees with the Taz. He also cites the Radvaz 946 who says the same. | ||
* "Levush's Heter Iska": Shulchan Aruch 177:18 based on the Rivash allows selling specific amount of items at a price that is cheaper than the market price. Then the buyer would stipulate that he wants the seller to deliver the goods by a specific date and if he doesn't do so he has to pay a penalty of a certain amount. Then the buyer would pay upfront and the seller would miss the delivery date and be obligated to return the original payment as well as the penalty. That isn't ribbit since it is a penalty and not a payment for the time value of money. Additionally since it is done completely with sales it isn't considered a loophole around ribbit. For this to work the seller actually needs the property he is selling and the buyer needs to make a legal acquisition of the property ([[kinyan]]). Levush 167:1 adds that the buyer needs to be ready that the seller actually deliver the goods by that date instead of paying the penalty. Taz 167:1 adds that this is forbidden if initially they stated that they want a loan since then the entire deal becomes a loophole to interest. Nekudat Hakesef 167:1 argues with the Taz since this case is completely a sale and therefore isn't an issue of finding a loophole to ribbit even if one originally requested a loan. | * "Levush's Heter Iska": Shulchan Aruch 177:18 based on the Rivash allows selling specific amount of items at a price that is cheaper than the market price. Then the buyer would stipulate that he wants the seller to deliver the goods by a specific date and if he doesn't do so he has to pay a penalty of a certain amount. Then the buyer would pay upfront and the seller would miss the delivery date and be obligated to return the original payment as well as the penalty. That isn't ribbit since it is a penalty and not a payment for the time value of money. Additionally since it is done completely with sales it isn't considered a loophole around ribbit. For this to work the seller actually needs the property he is selling and the buyer needs to make a legal acquisition of the property ([[kinyan]]). Levush 167:1 adds that the buyer needs to be ready that the seller actually deliver the goods by that date instead of paying the penalty. Taz 167:1 adds that this is forbidden if initially they stated that they want a loan since then the entire deal becomes a loophole to interest. Nekudat Hakesef 167:1 argues with the Taz since this case is completely a sale and therefore isn't an issue of finding a loophole to ribbit even if one originally requested a loan. | ||
* Modern Heter Iska: Chelkat Yakov YD 68 explains that it isn't a legal loophole because the parties involved really intend to follow the contract and not violate interest. (In light of the Taz 167:1 and others it is hard to understand this explanation.) Minchat Shlomo 1:27 is troubled how the Heter Iska is permitted but yet allows it completely as is the practice.</ref></p> | * Modern Heter Iska: Chelkat Yakov YD 68 explains that it isn't a legal loophole because the parties involved really intend to follow the contract and not violate interest. Chelkat Binyamin Kuntres Heter Iska n. 12 agrees. (In light of the Taz 167:1 and others it is hard to understand this explanation.) Minchat Shlomo 1:27 is troubled how the Heter Iska is permitted but yet allows it completely as is the practice.</ref></p> | ||
# Is using a heter iska permitted<ref>Maaseh Rav n. 108 writes that the Gra disapproved of the heter iska altogether. See however Tosefet Maaseh Rav n. 28 which quotes Rav Chaim Volozhin as permitting it.</ref> initially or only after the fact or in a difficult situation? Some poskim hold that it is only permitted in extenuating circumstances in order to make a parnasa.<ref>The Sma (Derech Aruka n. 22), who popularized the modern heter iska, introduced it by saying that it should only be used as an ad hoc leniency for people to have basic needs. Malveh Hashem 13:27 concludes that the heter iska should only be used in extenuating circumstances. Mishpatei Ribbit 28:2 agrees.</ref> Others hold it is totally permitted when done correctly.<ref>Chatom Sofer 4:48, Imrei Yosher 2:192, Brit Yehuda 40 fnt. 1, Horah Brurah (Kuntres Heter Iska ch. 2). Brit Yehuda concludes that someone who wants to be lenient can be and someone who wants to be strict will be blessed.</ref> Nonetheless, one should ensure not to use it at the expense of doing the chesed of lending another Jew money for free when that is possible.<ref>Chafetz Chaim in Ahavat Chesed (Gemiliut Chesed 15) only complains that using the heter iska avoids lending money for free which is a chesed. Aseh Lecha Rav 1:60 (also printed in Or Torah 5732 Shevat siman 72) writes that the heter iska is permitted since it is for the purpose of business and only when a poor Jew asks for a loan a person may not use a heter iska and doing so would violate the basic principle of the halacha. Instead one should give them an interest free loan if one could. </ref> | # Is using a heter iska permitted<ref>Maaseh Rav n. 108 writes that the Gra disapproved of the heter iska altogether. See however Tosefet Maaseh Rav n. 28 which quotes Rav Chaim Volozhin as permitting it.</ref> initially or only after the fact or in a difficult situation? Some poskim hold that it is only permitted in extenuating circumstances in order to make a parnasa.<ref>The Sma (Derech Aruka n. 22), who popularized the modern heter iska, introduced it by saying that it should only be used as an ad hoc leniency for people to have basic needs. Malveh Hashem 13:27 concludes that the heter iska should only be used in extenuating circumstances. Mishpatei Ribbit 28:2 agrees.</ref> Others hold it is totally permitted when done correctly.<ref>Chatom Sofer 4:48, Imrei Yosher 2:192, Brit Yehuda 40 fnt. 1, Horah Brurah (Kuntres Heter Iska ch. 2). Brit Yehuda concludes that someone who wants to be lenient can be and someone who wants to be strict will be blessed.</ref> Nonetheless, one should ensure not to use it at the expense of doing the chesed of lending another Jew money for free when that is possible.<ref>Chafetz Chaim in Ahavat Chesed (Gemiliut Chesed 15) only complains that using the heter iska avoids lending money for free which is a chesed. Aseh Lecha Rav 1:60 (also printed in Or Torah 5732 Shevat siman 72) writes that the heter iska is permitted since it is for the purpose of business and only when a poor Jew asks for a loan a person may not use a heter iska and doing so would violate the basic principle of the halacha. Instead one should give them an interest free loan if one could. </ref> | ||
# One may not use the heter iska to charge an amount that is unreasonable for the borrower to have made in his business or investment. Therefore, when using a regular heter iska, half loan half investment, one can only charge a percent that is reasonable for the borrower to have made with half of the money. That is, if the heter iska is to allow charging 7% for the entire iska transaction, it is only permitted if it is reasonable that the borrower will be able to make 14% on the iska, leaving 7% for the gain of the half investment. Otherwise charging higher rates is forbidden and oppressive to the borrower.<ref>Horah Brurah (Kuntres Heter Iska ch. 2) quoting Rav Meir Mazuz</ref> | # One may not use the heter iska to charge an amount that is unreasonable for the borrower to have made in his business or investment. Therefore, when using a regular heter iska, half loan half investment, one can only charge a percent that is reasonable for the borrower to have made with half of the money. That is, if the heter iska is to allow charging 7% for the entire iska transaction, it is only permitted if it is reasonable that the borrower will be able to make 14% on the iska, leaving 7% for the gain of the half investment. Otherwise charging higher rates is forbidden and oppressive to the borrower.<ref>Horah Brurah (Kuntres Heter Iska ch. 2) quoting Rav Meir Mazuz</ref> | ||
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# Some poskim permit using a heter iska if one has another business, assets, or savings plan any of which that are making profit and if not for the loan one would have sold that business, assets, or savings. The reason that it is permitted is because the heter iska could apply to that investment and its profits. If not for the loan one wouldn't have sold the business, assets, or savings plan anyway it is forbidden.<ref>Netivot Shalom p. 719 quoting Rav Elyashiv, Horah Brurah p. 148 agrees but adds if one has a business one doesn't need this leniency and one can just acquire for him a portion of your profits.</ref> | # Some poskim permit using a heter iska if one has another business, assets, or savings plan any of which that are making profit and if not for the loan one would have sold that business, assets, or savings. The reason that it is permitted is because the heter iska could apply to that investment and its profits. If not for the loan one wouldn't have sold the business, assets, or savings plan anyway it is forbidden.<ref>Netivot Shalom p. 719 quoting Rav Elyashiv, Horah Brurah p. 148 agrees but adds if one has a business one doesn't need this leniency and one can just acquire for him a portion of your profits.</ref> | ||
# The contracts that are made with a heter iska shouldn't include terms of interest but rather profits.<ref>Netivot Shalom p. 734 n. 34</ref> | # The contracts that are made with a heter iska shouldn't include terms of interest but rather profits.<ref>Netivot Shalom p. 734 n. 34</ref> | ||
# The poskim work to explain why the heter iska isn't considered a harama, legal subterfuge to avoid ribbit.<ref>Chelkat Yakov YD 68 writes that the heter iska isn't a harama because the people involved genuinely want to avoid any sin and so they fully mean to comply with all of the stipulations of the heter iska. Sefer Hazichronot cited by Brit Yehuda ch. 40 fnt. 1 writes that the heter iska is a harama. Maharsham 9:71 writes that the heter iska needs to be made in a way that is reasonable and not evident that it is going to come to interest since if there's a loss the borrower can swear he didn't gain and not pay any interest.</ref> | # The poskim work to explain why the heter iska isn't considered a harama, legal subterfuge to avoid ribbit.<ref>Chelkat Yakov YD 68 writes that the heter iska isn't a harama because the people involved genuinely want to avoid any sin and so they fully mean to comply with all of the stipulations of the heter iska. Chelkat Binyamin Kuntres Heter Iska n. 12 agrees. (In light of the Taz 167:1 and others it is hard to understand this explanation.) Minchat Shlomo 1:27 is troubled how the Heter Iska is permitted but yet allows it completely as is the practice. Sefer Hazichronot cited by Brit Yehuda ch. 40 fnt. 1 writes that the heter iska is a harama. Maharsham 9:71 writes that the heter iska needs to be made in a way that is reasonable and not evident that it is going to come to interest since if there's a loss the borrower can swear he didn't gain and not pay any interest.</ref> | ||
===Conditions of the Heter Iska=== | ===Conditions of the Heter Iska=== | ||
# Some heter iska's add a condition that if the borrower doesn't appear in bet din each erev rosh chodesh to submit his claims for his losses he has admitted that there were no losses. Some argue that this condition should not be added.<ref>Teshuvot Vehanhagot 6:181 argues that adding this clause of the Chayei Adam is a complete haarama and forbidden. He explains that the Chayei Adam is referring to a case where the investor wanted to know the deals of the business each month and as such he ask the borrower to inform him. However, for a bank that gives loans today they have no interest to know the works of each person's business monthly and requiring a borrower to do so is a complete mockery of halacha.</ref> | # Some heter iska's add a condition that if the borrower doesn't appear in bet din each erev rosh chodesh to submit his claims for his losses he has admitted that there were no losses. Some argue that this condition should not be added.<ref>Teshuvot Vehanhagot 6:181 argues that adding this clause of the Chayei Adam is a complete haarama and forbidden. He explains that the Chayei Adam is referring to a case where the investor wanted to know the deals of the business each month and as such he ask the borrower to inform him. However, for a bank that gives loans today they have no interest to know the works of each person's business monthly and requiring a borrower to do so is a complete mockery of halacha.</ref> | ||
