Question
I lent twenty thousand dollars with a heter isska for three years to someone who recently passed away. Even though there is another year remaining before the loan is due, the heirs wish to pay back the loan now since under the terms of the isska the borrower must add eight percent for every year the loan is outstanding. Since the borrower held on to the loan for two years the heirs owe me three thousand two hundred dollars in addition to the principal of twenty thousand dollars. Is there any problem collecting this addition?
Answer
In the previous article we saw that the answer to your question depends on the nature of the oath that the recipient must swear under the terms of the heter isska if he wishes to claim that the profits that he earned do not justify payment of the sechum hapeshara. We saw two positions.
As we explained, every isska consists of two parts. Half is a loan from which the investor earns no profits and half is an investment from which the investor earns the entire profit. The usual heter isska adds a clause that the investor will receive a certain amount (known as the sechum hapeshara) that is additional to the amount that he invested, unless the recipient swears that the profits earned do not justify this payment. The answer to your question depends on the nature of this oath.
The position of the Tur Ha’even was that when one borrows using a heter isska, the recipient fully accepts upon himself liability to pay the sechum hapeshara and only leaves himself a possibility to avoid payment if he actually swears. (Others who agree with the Tur Ha’even are the Atsei Halevono, Sha’ar Mishpot, Maharsham, Chochmas Odom and others.) The oath is specific to a heter isska since in order that the heter isska will not be considered ribbis the recipient must have some way to avoid having to pay more than the amount that he borrowed (in this case the sechum hapeshara). If the recipient has no way to avoid paying more than he borrowed, the extra amount that he pays is in effect interest. The structure of the heter isska allows the recipient to avoid paying more than he borrowed since the investor agrees at the outset to believe the recipient if he swears that in view of the actual profits earned, he, the recipient, is not required to pay the sechum hapeshara.
The Erech Shai however, argued that this cannot be correct because acceptance of a condition that requires the recipient to pay unless he swears already constitutes ribbis, because the only reason the recipient would ever agree to such an arrangement on the half that is an investment is because he also received a loan from the investor (the other half of the isska). (Others who agree are the Bigdei Yesha and Malbushei Yom Tov.) Rather, the oath is just the general oath that was instituted by the Rabbis on partnerships. This is known as a shevuas hashutfim-the oath of partners, because every partner has the right to impose an oath on his partner that he isn’t withholding funds that belong to the partnership.
Since the nature of their relationship is an isska which requires the recipient to give half of his profits to the investor, the investor may demand a shevuas hashutfim from the recipient that he is giving him at least half of his profits i.e., that he did not earn more than double the amount the recipient is agreeing to give to the investor. However, the investor agrees to forego his right to demand an oath that he is receiving half of the profits, if the recipient pays the sechum hapeshara.
According to this approach, the reason the recipient is allowed to pay the sechum hapeshara and it is not classified as interest is because we consider that he is paying in order to avoid having to swear that he gave the investor half of the profits. Unlike the first approach, the recipient did not accept himself the requirement to swear because it is an oath that was imposed by the Rabbis. However, if the recipient for some reason does not have to swear, he is not allowed to pay the sechum hapeshara because then that is just interest.
The rationale of the Rabbis in imposing this oath is that the investor does not know how much profit the recipient earned and he doesn’t have to believe the recipient’s declarations. Before the Rabbis imposed their oath, the recipient was simply believed when he said that he was giving his investor half of the profits. However, the Rabbis gave the investor the right to impose an oath on the recipient to support his claim. If the recipient declares that he did not earn enough profit but cannot prove this, the investor may impose an oath on the recipient. This is only relevant if the recipient claims that the return on his investments was less than double the sechum hapeshara. This is because in the usual heter isska, the recipient is required only to give half of his profits to the investor. If one follows this approach, the recipient must pay only if he is required to swear and wants to pay to avoid swearing.
However, in your case (and in any case involving heirs of the original recipient), since we assume that heirs do not know how much profit their father earned, they do not need to swear. Since they do not have to swear, there is no justification for them to pay the sechum hapeshara, since they only pay that to avoid an oath.
We should note that if one uses the heter isska that was written by the Chochmas Odom then this issue is minor. (This heter isska is printed after klal 143 of the Chochmas Odom and other seforim about the laws of ribbis.) The reason is that this heter isska operates for successive periods of one month. According to it if, at the end of each month, the recipient does not actively claim that his earnings that month did not justify payment of the sechum hapeshara, it is considered an admission on his part that he did earn the required profits that month. The isska then renews itself for another month. Therefore, if the recipient passes away, his heirs will need to pay the sechum hapeshara for all the months that he was alive, since at the end of those months he admitted that he earned the necessary profits. If your father used this heter isska, the entire issue is only the part of the month, during which your father passed away, that preceded his death.
Another situation which depends on this dispute is where the lender somehow knows that the recipient did not earn a profit on the investment that he made with the investor’s money. This can happen when the isska document states what investment the recipient will make with the money he receives from the investor. For example, this happens when a person borrows money with a heter isska in order to buy a house and the parties include this information in the isska document. In case the price of houses went down during the time the loan was outstanding, if one follows the opinion of the Erech Shai, the recipient is not allowed to pay the sechum hapeshara, whereas according to the Tur Ha’even he is allowed to pay.
We note that when using a standard heter isska this issue is avoided since the parties do not specify the investment that the recipient will make with the investor’s money. In this case the only way the investor will know that the recipient did not earn a profit is if he knows that all the investments made by the recipient did not earn the required profit.
Another difference between these two approaches is if the sechum hapeshara is high e.g., if the sechum hapeshara is fifteen percent. Then the Erech Shai holds that the recipient is not allowed to give the full sechum hapeshara, since it is not common for people to earn thirty percent over a long term. Since it is known to be uncommon, the investor does not have a right to impose an oath on the recipient that he did not earn more than thirty percent. Again, since the recipient does not have to take an oath there is no reason for him to pay the sechum hapeshara since, as we said, the justification for paying is in order to avoid taking an oath. In contrast, according to the Tur Ha’even he must pay, since that is what he agreed to do.
Many ask on the Erech Shai that the objection that he had to the Tur Ha’even’s approach is a problem for his approach as well, since in practice beis din would not have imposed a shevu’as hashutfim on the recipient in a heter isska if he did not accept upon himself the obligation to swear. The reason is because many rule that this oath was not imposed in the case of an isska but only on a regular partnership. The only reason the recipient in practice has to take this oath in the case of a heter isska is because he agreed to do so. Thus, even according to the Erech Shai it seems that the reason the recipient agreed to subject himself to this oath is because he received a loan from the investor.
A second important point is that, as the Tur Ha’even wrote, the custom is that heirs pay the sechum hapeshara.
However, because of the severity of the Erech Shai’s question later poskim sought to justify our custom.
One approach is suggested by the Nesivos Sholom (Kuntress Heter Isska section 7). He proposes that the Tur Ha’even’s approach understood that the nature of the sechum hapeshara is not a percent of the profits but rather it is the amount that the recipient agrees to pay to buy out the profits of the investor. The rationale is that the investor is entitled to half of the profits by the nature of an isska. Since this might be a substantial amount and or it might be nothing, the recipient makes a deal with the investor to buy out the investor’s share of the profits for a fixed amount, which is the sechum hapeshara. The only reason the recipient must be allowed to swear that he does not owe the sechum hapeshara is because otherwise the arrangement appears to violate the laws of ribbis.
If one follows this approach, the heirs may pay the sechum hapeshara since that is what their father agreed to pay to avoid the possibility that he may have to pay more to the investor.
In conclusion: The general custom is that heirs pay the investor the amount that their father agreed to under the terms of the isska agreement. If the heter isska they used is the one that was composed by the Chayei Odom, the only issue anyway is the part of the month in which the deceased passed away.
However, we saw that the understanding of heter isska is the subject of a major dispute among the poskim and it affects the basic understanding of the nature of the oath that the recipient can make in order to avoid paying the sechum hapeshara. This dispute has many repercussions to other common ribbis issues, as was explained.
