This week’s article deals with the aspects of interest as they are manifest in certain free-loan societies. Can one belong to such a group? And if so, what is the correct halachic approach to taking out a loan? Is one allowed to trade a loan for a loan? And can a charity fund charge interest for loans? Can a gemach charge for its services, and how did Rav Fischer zatal solve the ribis issues Rabbi Uri Zohar ran into in his teshuva process? Of this and more, in the coming article.
Ribis in Interest-Free Loans
In this week’s parashah Hashem admonishes Bnei Yisroel not to take interest from Jews: “You shall not give interest to your brother, [whether it be] interest on money, interest on food or interest on any [other] item” (Devarim 23:20). In recent years we’ve seen an influx of gemachs that call themselves Free-Loan Societies. Superficially, this seems to be the ultimate halachic solution for loans, but in the following article we will point out various halachic inadequacies that exist in these funds, as well as offer solutions for them. These societies function in various modes, and in this article, we will focus on two of the most common ones – a loan for a loan, and loans for paying members.
Loan for Loan
One of the more common operational modes has members deposit money in the fund. This earns them the right to receive a loan, if and when they might need it. The Beis Yosef and Rama (Yore Deah 109:9) are undecided regarding the ribis here. There are three opinions in this case:
1) Sefer Hatrumos (Sha’ar 46, part 4:3) and Maharam of Rothenberg (quoted in the Mordechai, 339:40) both write that it is permissible, lechatchila.
2) The Mordechai (Bava Metzia 247:340) records his Rebbe’s opinion that this is ribis m’doraisa.
3) The Rosh (Klal 108:16) is of the opinion that it is ribis, but mi’drabonon.
The differences in opinion are explained by the Chidushei Harim (Bava Metzia 105) and Avnei Nezer (Yore Deah 148:5), and depend on the financial definition of a loan. Is a loan something of financial value for which people would pay money just that the Torah forbids taking or paying for it? In this case, giving a loan for a loan consists of giving something of financial value – i.e. ribis m’doraisa. Another approach sees a loan as a mazik in the form of grama — using someone else’s money thereby preventing him from using it. Even without the issur of ribis one owes nothing for causing such a damage, in which case a loan is a valueless favor and m’doraisa it is permitted. Nevertheless, mi’drabonon, we are not permitted to do a favor in return for a loan, even if it has no financial value.
How is this resolved l’halacha? The Sma writes (Kuntress Hasma, Ribis Arucha:5) that because the Rema records the lenient opinion last, halacha follows that opinion. But the Levush (Yore Deah 160:10) writes that the halacha is to be machmir. The Gra (Yore Deah 160:16) writes it is assur because even ribis devarim (spoken ribis) like saying ‘thank you’ is forbidden. Therefore, it seems that the Gra was of the opinion that this kind of ribis is d’rabonon. However, Shulchan Aruch Harav (Hilchos Ribis 6) rules to be machmir here because it is a safek d’oraisa. This seems to also be the opinion of the Chochmas Adam (131:14).
Loan for a Different Loan
The above is true if the sum of both loans is the same and the terms for the first deposit are the same as the term of the loan. But if one of the variables is different, all poskim agree (Levush ibid; Chochmas Adam, ibid; Shulchan Aruch Harav, ibid; Brit Yehuda chapter 11, 3-4) that this setup is forbidden.
A Loan When Credit is High
The Levush (ibid) writes that if one takes a loan in regular times and his friend gives him a loan in return when merchandise is readily available (thereby allowing his to profit more from the loan), even if the sum and terms are the same, there is an issur of ribis involved. Following this, the Bris Yehuda writes that all agree that if the accepted interest rates changes the issur of ribis exists, even if both loans’ terms and sums are the same.
According to the above, if the owners of this kind of fund are Jewish one should refrain from taking a loan in return for a deposit unless the owners signed a halachically accepted heter iska form, verified by a halachic authority.
Loans for Regular Donors
Another arrangement is a fund that gives loans only to paying members. Members are obligated to make monthly donations. In most cases the donations must reach a specific amount before a loan may be taken. At times, the loan can only be taken when the member is making a wedding, etc.. This arrangement is common in Israel today, especially for the purpose of marrying off children. In chutz la’aretz it exists under the name Hebrew Free Loan Society.
Rabbi Chaim Kanievsky shlita writes in Derech Emuna (Matnos Aniyim, chapter 10:42) quoting his uncle, the Chazon Ish, that managers of free loan societies (gamachs) should be careful not to obligate borrowers to give the gemach a donation in return for the loan, as it carries a possibility of ribis m’doraisa. This is also the opinion of Rav Moshe Sternbuch shlita (T’shuvos Vehanhagos, volume III, chapter 266).
Donations, Without Loans
The proposed solution for this setup is for the fund to declare that they are not obligated to give loans to their donors, and to actually give loans to non-donors. It can also announce that it may try to give donors first priority in loans, but in no way are they obligated to do so.
In this case, since the gemach does not commit itself to giving a loan in return for the donation, and the donor cannot demand his money back if he does not receive a loan in the end (which is anyway the case where there are donors to whom nobody would lend money because of irresponsibility), therefore the donation is not in any way a payment for the loan and therefore is not ribis m’doraisa. Nevertheless, it is early ribis — when one sends a gift prior to asking for a loan — which is assur mi’drabonon. The gift is a tool to bribe someone to give a loan, and it is assur (Shulchan Aruch, 160:6).
Completing the donation to the fund prior to requesting a loan consists of ribis mi’drabonon. Nevertheless, one who is given a loan in return for a pledge for a future donation which begins with the loan is giving/demanding ribis m’doraisa.
If one stipulated with the gemach management that his donation is in return for the loan, whether before receiving it or after, although the stipulation does not obligate the fund and they can refuse to give him a loan – and the borrower can refuse to give the donation — in any case the Machane Ephraim (Ribis, chapter 18), Rabbi Akiva Eiger (glosses on the Shulchan Aruch, 160:6) and the Chavos Da’as (160) view this as ribis m’doraisa. This is because in reality, the donation is made as per the request at the time of the loan.
Early Ribis for Charity
In a case of early ribis, there is room for leniency if the money goes to tzedakah (per the opinion of the Shulchan Aruch, Yore Deah 160:18). Therefore, if the gemach’s purpose is to help destitute families, it is permissible to donate and borrow from them money in a way that involves early ribis, which is asur mi’drabonon. It is important to note, though, that the Shach (Yore Deah 160:26) writes that it is not customary to be lenient in this, and these monies, too, should be lent with a heter iska, or without the ribis. Nevertheless, the Noda B’Yehuda writes (Yore Deah chapter 40) that one can rely on the lenient opinions.
Many contemporary poskim agree that it is permissible to borrow from such funds, using the leniency of early ribis, because their main mission is helping poor people. However, Shevut Yitzchok (Ribis) quotes Rav Elyashiv zatal, indicating it is preferable to refrain from it.
Rabbi Nissim Karelitz zatal (Chut Shani, Ribis, chapter 10) however, was of the opinion that even from a gemach whose main mission is to help poor people it is asur to borrow with early ribis, unless the fund lends money to everyone, giving precedence to donors, and does not require a donation in return for a loan. Rav Nissim also was of the opinion that if the gemach belongs to a specific community, the money is not tzedakah and one cannot borrow from such a fund with a donation of early ribis.
Ribis from Ownerless Property
The Rashba (part 1 669:63) writes that funds that were donated for supporting Torah or for tzedakah, although the treasurer can decide how much to give to every poor person, are nevertheless considered ownerless monies, to which the issur of ribis does not apply. The issur of ribis only applies when there is a loan between one Jew and another, not between a public entity and a Jewish person. Practically, though, this leniency should not be applied since the Rosh (Klal 13:8) and Yam Shel Shlomo (Bava Kama chapter 8:72) rule that even money that was designated for the poor, although it is not the property of a specific person, is still considered “your brother’s” money and the issur of ribis does apply. This is also the opinion of the Shulchan Aruch (Yore Deah 160:18) — money that was set aside as hekdesh for the poor or to support Torah may not be lent with interest, only with ribis d’rabonon as per the leniency for ribis for tzedakah.
If the societies’ funds are comprised of private deposits, which can be withdrawn at any time, it is private people’s money that is lent out with interest, and asur. But if the deposits are full donations and do not belong to anyone, with even the treasurer having no rights to them – their only use is to be lent out to others, in which case Rav Elyashiv is of the opinion (Halichos Sade edition 108, p. 23) that ribis does not apply.
Rav Shlomo Zalman Auerbach (Minchas Shlomo 71:4), though, sees it differently. He is of the opinion that in this case the donation is not a loan but a partnership in a financial institution – every person invests a sum for being given the possibility of future borrowing when necessary. The issur to lend money in return for a loan is only when a specific person promises to give a loan for a loan. However, Rav Nissim Karelitz (Chut Shani, ribis) opines that this arrangement is, too, involves an issur of ribis.
One of the solutions for such a society or gemach is the Heter Iska. The Teshuvos Vehanhagos (volume 3: 266) details how exactly to construct this agreement so it is appropriate for this kind of establishment. In case the loan is based on a Heter Iska, one must ensure it was set up under proper rabbinical supervision.
Deposit for Loan, But Not for Me
When a loan is used to pay for another’s expenses — such as a child’s schooling or wedding — the best solution is for the donation to the fund to made by the parents, but the loan be put under the child’s name and given to him. (The parent is free then to give the child the monthly payments if he so wishes to). One is permitted to give a donation or gift so another person will be given a loan. The issur of early ribis is when the ribis comes from the borrower’s pocket to the lender’s. Therefore, a parent can pay a gemach so they will lend his child money.
As we saw, there are numerous methods for running free-loan societies, all which may prove problematic ribis-wise. There are different heterim to circumvent the issues involved, and one must be very careful to consult a halachic authority who is knowledgeable in this complicated field before taking a loan.
To complete the topic, we will list here a number of guidelines for running a free-loan society as outlined by Rav Nissim Karelitz and Rav Elyashiv zatal.
Practical Guidelines for a Free Loan Society
Chut Hashani (Ribis, chapter 10) lists the following rules:
- The gemach is not obligated to lend money to donors.
- The gemach management can lend money at its own discretion to members and non-members alike.
- The gemach cannot make the majority of their loans to members. Loans will be given to anyone.
- Paying members can be given first priority to loans.
- The management cannot, in any way, demand borrowers to pay membership to the fund before, during, or after the loan.
- Donations belong to the fund and donors forgo all rights to these monies, even if they will never receive loans from the society.
Shevut Yitzchak (Ribis) lists guidelines mentioned by Rav Elyashiv:
- Donations do not obligate the gemach to give a loan.
- The loan is not dependent upon continued donations to the gemach.
- The gemach lends to paying and non-paying member alike.
- Asking for donations to the gemach is permitted without mentioning the preference to paying members to the donor. This must not be done at the time of lending or paying back the loan because at that time it appears as ribis.
- A gemach may not charge even a small processing fee, but the manager can charge for his efforts, provided that he bears no responsibility to the money if it is lost. Charging for his efforts and then donating the money to the gemach is the only way that allows borrowers to give money to the gemach – they cannot give it directly to the fund.
Rav Blau (Bris Yehuda, Ribis, Ikkarei Dinim chapter 8:7) recounts a story that took place during the lifetime of Rav Yosef Chaim Sonnenfeld zatal.
In the old city of Yerushalyaim there was a free-loan gemach known as Sha’arei Chessed. One time, the management was sitting for a regular meeting with the rav and mentioned the idea of charging a small management fee from borrowers. Rav Yosef Chayim Sonnenfeld refused to have a gemach under his management that would demand borrowers to pay for management. Rav Blau explained that in his opinion this was because if they did so, the gemach would not be considered a mitzva of gemilus chasadim. He proves this from the Binyan Tzion, who writes (part 1, 65) “A fund that lends money for a low interest with a Heter Iska does not fall within the definition of gemilus chasadim.”
Similarly, Rav Isser Zalamn Meltzer (Brit Yehuda, ibid) refused to sign a surety in the name of the Eitz Chayim Yeshiva for loans taken from a gemach that would charge percentage-based maintenance fees.
L’halacha, Rav Blau writes that charging management fees is permitted, but one must exercise extreme caution when doing so. He illustrates this point with a real-life example — a person with some extra money was zoche to open a gemach. One day, he came to Rav Blau to ask for a heter to charge maintenance fees. Rav Blau permitted it, but this person began charging for different expenses under the title “maintenance fees”, and his mitzva of chesed because a major aveira of ribis.
Rav Uri Zohar and Ribis
An interesting solution was offered by Rav Yisroel Ya’akov Fisher zatal when Rav Uri Zohar shlita approached him with his question: after Rav Zohar became a ba’al teshuva he learned the halachos of ribis and realized that he had a loan that carried interest. This loan was signed and verified by a lawyer and he could not get out of it. Now that he learned how grave the sin of paying or receiving interest was, he went to his friend who had lent him the money and explained his problem. He asked to pay up his debt without the interest. The friend refused, threatening to take him to court if he would not pay the interest. He also threatened to use the government collection agency if he continued refusing to pay.
Rav Zohar turned to Rav Blau who was known as the address for ribis questions, but the rav could find no solution to his problem. It seemed that all he had left to do was to wait for the collection agency who would just take whatever they wanted. “However,” Rav Blau said, “try Rav Yisroel Ya’akov Fisher. He will surely find a solution for your problem.” He asked Rav Zohar to return with the answer.
Rav Zohar went to Rav Fischer. He listened to the problem, and answered right away –”They are thieves and robbers. You can pay them whatever they want. There is no halachic problem with it.” When Rav Zohar returned to Rav Blau with the answer, Rav Blau was amazed and hungry for an explanation. He requested Rav Zohar to please return, tell Rav Fischer he had sent him, and ask for an explanation. Rav Fischer answered, “It is very simple. Clearly, your non-religious friend did not make a pruzbul, and according to the date of the loan, the shmitta year passed and the loan was cancelled. Therefore, you are not obligated to pay him anything. He is a simple highway robber, demanding money of you. Therefore, since there is no principal — there is no interest (ribis). But if he threatens you with taking you to court for money that you do not owe him, go ahead and pay whatever he asks. He is just a common thief.”
Teshuvos Vehanhagos (volume 3, chpater 266) quotes the Gra (Ma’ase Rav Hachadash, chapter 13) describing a chilling dream that clearly illustrates the severity of hilchos ribis. A talmid chacham once saw a deceased person in his dream. The person recounted that in Shomayim the issur of ribis results in grave punishments and contemporary heterim are disregarded. The Gra adds that the issur of ribis is very serious since it is an ongoing issur – every second of the day. Even on Yom Kippur, when standing and crying in shul – if one lent or borrowed money with ribis, this sin keeps mounting up.