Question:
Hello and thank you so much for helping to spread Torah and helping us all to keep the halacha!
I work for a small law firm that is owned by Jewish partners. Many (if not most) of their clients are Jewish. They have a number of bad debts - clients that for some reason or another are not paying their fees. They would like to outsource recovery of debts to a debt collection company. The debt collection company keep a percentage (I think 30%) of all debts that they successfully recover. That is their fee. They suggested that we add a clause to our cost agreements to offset their fees. There are 3 options for such a clause:
Option 1: If the client does not pay on time and we send their debt to the debt collectors, the client has to pay interest on the outstanding debt.
Option 2: If the client does not pay on time and we send their debt to the debt collectors, the client has to pay a one-off penalty of 30% on top of their fees to cover the cost of debt collection.
Option 3: If the client does not pay on time and we send their debt to the debt collectors, the client has to pay a one-off penalty of $200 on top of their fees to cover the cost of debt collection.
I think option 1 would be forbidden due to ribit. Would options 2 and 3 be OK?
The other idea is to only use this clause for non-Jewish clients. But that is problematic for 2 reasons:
(1) We might make a mistake and not realise that a client is Jewish.
(2) If people found out that we treat non-Jewish clients differently it wouldn't look good.
Another option is to include the clause in all contracts but to only enforce it for non-Jewish clients. I think this is a problem because even having the clause in the contract can be a problem of ribit even if we don't actually enforce it. Is that right?
Thank you very much.
Answer:
Hello,
As you write, option one is problematic, as we may not take interest on outstanding loans. You can however sign a heter iska, with each client, which will cover this clause. You can write a clause that all transactions and fees are done according to the “Heter Iska of Bris Pinchos”, (here is a copy of it) Heter - Iska (Bris Pinchas) or any other heter iska. If you need help setting this up, call 732-228-8558, and they will help you with this.
Option two, is fine being that the charge in deed is in order to pay for the charges that you incur in order to get the debt paid.
Option three, is also fine, but doesn’t seem to be that practical, because you might be losing a lot of money if the amount owed is a lot more than $200.
Option four, is questionable, but you don’t have to come on to it, as you have other options.
Best wishes
Sources:
תורת רבית פ"ה סע' כ"א, ברית פנחס פ"ו סע' ג'.
