Ribis: A Halachic Anthology
Rabbi Joseph Stern
PART III
The 
-- Its Development and Structure
A. Penalty for Late Payment
The Mordechai proposed structuring every loan as a straight-forward transfer of funds, where the creditor can only demand that the principle be repaid. However, if the loan is not paid promptly then a penalty (equivalent to the amount of the Ribis) may be levied. This scheme was not widely accepted because of the widespread opinion (shared by the Shulchan Aruch) that even a penalty is a biblical violation of Ribis.
B. Heter Iska - Half Loan, Half Investment
This approach called for establishing an investment company whereby the debtor serves as a trustee for half the funds while the other half is granted as a loan. The profits and losses are divided equally. However, it is mandatory to pay the debtor at least a token fee for his services as a trustee. If not, he is managing the creditor funds in return for a loan, a clear incidence of Ribis. Often, clauses are inserted in the contract (
)
concerning the debtor's
management of the funds. The contract further stipulates that the
debtor must swear in case of any dispute regarding the amount of
profit earned and two witnesses must certify any losses. However,
if the debtor forwards to the creditor a certain sum (equivalent to
the amount of "interest"), the above requirements are waived.
(Some authorities permit specifying a sum to be paid monthly,
others only a fixed lump sum payment.) This format, with minor
variations, serves as the basis for most contracts of Heter Iska in
contemporary times. Rav Englander insists that if specific sums are
mentioned in an Iska document, only those sums may be collected
by the creditor. For example, the creditor depositing money in a
Jewish bank (assuming a bank requires a Heter Iska) may not
accept gifts offered by the bank unless they are specified in the
Heter Iska.
C. A Revolving Fund
The Chochmas Adam favors another format of Heter Iska. He advocates a contract structuring the transaction as a deposit - whereby the "debtor" would be no more than a trustee and after the desired "interest" would be earned, the funds would be converted into an outright loan. As in the previous instance, the trustee must receive compensation for his efforts. However, the Vilna Gaon and Rabbi Yaakov of Lisa opposed this procedure.
D. Trusteeship or a Rental of Fund
Rav Breish, while defending the traditional Heter Iska structure for transactions between individuals, feels that it is not feasible for lending operations of Jewish banks. Firstly, it is impractical for every borrower to receive a fee for his trusteeship of the bank's funds. Furthermore, the interest is paid in monthly or quarterly installments, rather than in a lump sum, a controversial procedure.
C. Heter Iska for a Mortgage
Rav Moshe Feinstein suggests an
form specially
designed for financing a mortgage. He advocates that the seller
retain partial sovereignty over the home and merely rent out that
part. The "interest" then will be construed as rental payments, not
as Ribis.
D. Contemporary Concerns
As business conditions change, questions have arisen regarding the practicality of the traditional
. The
Chelkas Yaakov defends this practice and answers effectively
most concerns that have arisen.
- ) Isn't the
a
- a devious scheme to
counteract the Ribis law? Rav Breish responds that we find ample
precedent for such a
in the sale of Chametz and of a first
born animal 
to a Gentile. On the contrary, even those who
dispute some aspects of the sale of chametz (e.g. selling animal feed
along with the animals) will accept the
- ) Often the debtor or creditor are not observant Jews and
don't intend to comply with the terms of the
. Despite the
opinion of many authorities that both parties must observe the
Ribis laws for an
to be effective, Rav Breish and the
Minchas Yitzchak permit it if necessary even for non-observant
Jews (Rabbi Breish refers to the famous statement of Rambam
that ultimately every Jew seeks to do right, it being only temporary
passion that causes him to disregard halacha.)
- ) Few, if any, deals are true investment deals, but rather
outright loans. Often, the money is lent to people who are not even
remotely familiar with financial matters (e.g. teachers, domestic
help). Rav Breish proves that not all of these factors invalidate a
.
- ) May a
be written once and apply for all
forthcoming transactions (an approach favored by many Polish
rabbinic authorities)? The Minchas Yitzchok opposes any such
advance
requiring a separate contract for each deal.
Conclusion
- ) Virtually any type of financing scheme, if conducted between Jew and Jew, may involve Ribis. Careful consideration should be given to the Ribis ramification prior to structuring a transaction.
- ) If at all possible,
should be sought for any commercial transaction that may involve Ribis.
- ) Where such an arrangement is not feasible, rabbinic counsel must be sought.
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