Laws of Ribis, Part 1 - Rabbi Daniel Grabsky shlita

00:02 Speaker 1 You’re listening to “Lema’an Yishme’u,” a podcast from Machon Halacha Chabad.

00:09 Speaker 2 Today, with Hashem’s help, we’ll talk about the laws of interest. As you know, there are many, many details in the laws of interest. It’s a complex subject with many, many questions. With Hashem’s help, we’ll try to go through all these laws. In the past, the laws of interest didn’t come up so often. Not everyone had a business; not everyone gave someone a loan. It wasn’t common. Only someone who had a business or gave loans needed to know what interest was, what counted as interest, and all the details involved. Today, we can certainly say that things have changed completely. Almost everyone encounters the laws of interest, even without realizing it. The world has changed, and the whole economy runs on credit today. You buy in installments; you pay up front or at the end; you get a discount or you don’t; you receive something now or a week from now; you order through a website, and so on. There are many details, many situations that intersect with the laws of interest. Of course, there are also things we aren’t even asked about. We’re required to have a pension fund. Various laws impose indexation and interest for late payment. We’re bound by payment terms. If I forget once to pay the gas company or the electric company, I immediately get a letter: “You must pay at once.” There’s interest and indexation involved. So how do we deal with all these things that constantly come up? There’s the savings plan for every child: money is being saved even for a young child, and those funds are either in a bank, where the bank invests them in interest-bearing bonds, or invested through an insurance company or an investment firm. Everything revolves around credit, interest, and investments. We have to know how to navigate all of this without, G-d forbid, violating the prohibition against interest. So let’s begin with the Rambam. In Hilchos Malveh VeLoveh, chapter 1, the Rambam discusses a very important mitzvah

02:51 Speaker 2 indeed: the positive mitzvah to lend to the poor among the Jewish people, as it says, “If you lend money to My people, to the poor person among you.” We have a positive mitzvah from the Torah to lend money to a poor person. The Rambam adds, “And this mitzvah is greater than tzedakah.” It’s a very, very important mitzvah, even greater than tzedakah. And Hakadosh Boruch Hu wants us to fulfill this mitzvah wholeheartedly. We give someone a loan, we help him, and we receive nothing in return for that loan. Of course, we don’t receive more money. It wouldn’t occur to me to lend him a hundred shekels and get a hundred and twenty shekels back. But may I get the hundred shekels back along with a bouquet of flowers or a box of chocolates? What if I get the hundred shekels back, and a week later, because of the loan, he wants to give me a gift—an extravagant mishloach manos because I lent him money? We’ll look at all these things in detail, but generally speaking, there’s a problem here with the prohibition against interest. You gave something, and you receive something more in return. Even speech can be a problem. You give something and get the same thing back, but with an added thank-you, added blessings, or added help. Is there a problem of interest here? Sometimes yes, sometimes no. With Hashem’s help, we’ll learn about all these things. So first, as we said, giving a loan is a positive mitzvah from the Torah, an important mitzvah even greater than tzedakah, and it must be done without receiving anything in return. If we look further on, in chapter 4, the Rambam turns to the prohibitions connected with the laws of interest. The Rambam says in halacha 1: “Neshech and ribis are one and the same, as it says, ‘You shall not give him your money with neshech, nor give your food with marbis.’” He then cites all the verses connected with the prohibition against interest. If, G-d forbid, a Jew violates

05:12 Speaker 2 the prohibition against interest, how many prohibitions—how many negative commandments—does he violate? The Rambam tells us later in this halacha: “We have learned that one who lends at interest violates six negative commandments.” One act, one loan, and he has already violated six negative commandments from the Torah. The Rambam lists the verses: “Do not act toward him as a creditor”; “You shall not give him your money with neshech, nor give your food with marbis”; “Do not take from him neshech or ribis”; “Do not impose neshech upon him”; and “Do not place a stumbling block before the blind.” That’s six negative commandments from the Torah for a single loan, if someone, G-d forbid, gives a loan and receives interest in return. We can see just how extremely serious this is. What’s more, it isn’t only the lender who violates a prohibition; the borrower does too. That’s surprising. If a person is harmed, has he violated a prohibition? If someone, G-d forbid, steals, the thief has violated the prohibition against stealing. But has the person he stole from violated a prohibition? No. If someone is harmed, whether intentionally or unintentionally, he’s the one who was harmed. What do you want from him? Here too, the lender lends to the borrower, and the borrower is required to repay the lender with interest. The lender violates six negative commandments, but the borrower also violates a Torah prohibition. There are differing opinions about whether it’s two or three negative commandments, but it is certainly a prohibition. And this is the ruling in the Shulchan Aruch: the borrower, too, violates prohibitions from the Torah. Even if he wholeheartedly agrees to the loan with added interest, he still violates the Torah prohibition against interest. We see how strict the Torah is about this prohibition. The Torah wants us to give a loan for free, without any compensation, without anything extra. Anything extra already involves violations. More than that, as the Mishnah cited in the Shulchan Aruch says, the lender violates a prohibition, the borrower

07:35 Speaker 2 violates a prohibition, the witnesses also violate a prohibition, and so does the person who wrote the loan document. The person who demanded the loan also violates a prohibition, as does the person who signed as a guarantor for it. Everyone involved violates prohibitions when the loan involves forbidden interest. So how very careful we have to be about this. Let’s move on to the Alter Rebbe. In the Alter Rebbe’s Yoreh De’ah, we have one chapter with many, many sections—long sections. It’s remarkable how the Alter Rebbe took numerous sections of the Shulchan Aruch’s Yoreh De’ah and brought them all together in one chapter of eighty-one sections, covering all the laws of interest and of business arrangements. An interesting point: as we mentioned, where does the Rambam place the laws of interest? In chapter 4 and onward of Hilchos Malveh VeLoveh, in his Book of Civil Laws. Seemingly, they belong to what we would call Choshen Mishpat—though the Rambam doesn’t use those divisions. But in the Tur and the Shulchan Aruch, and likewise in the Alter Rebbe’s Shulchan Aruch, the laws of interest are in Yoreh De’ah. Choshen Mishpat deals with matters between one person and another: whether he caused me damage or not, whether he stole from me or not, all the laws governing relations between people, the laws of neighbors, and so on. It’s true that interest involves one person and another, but it belongs in Yoreh De’ah. It’s like the prohibition against chametz, like other prohibitions. The Torah has taken authority over this money involved in interest and decided: No, you cannot waive this. You cannot say, “We’ll give it to him as a gift.” You can’t; it isn’t in your hands, and it isn’t your decision. Just as with meat and milk and other matters, the Torah sets the rules for us. So here too, with the laws of interest, the Torah determines what is permitted. That’s why these laws are in Yoreh De’ah rather than Choshen Mishpat. How does the Alter Rebbe

09:53 Speaker 2 How does the Alter Rebbe open the laws of interest? Section 1: “One must be very, very careful about the prohibition of interest.” It is a warning. Not just “very,” but “very, very” careful, because, as we said, so many prohibitions are connected with it. Whether you lend to a poor person or a wealthy person makes no difference. You might think: Why would a wealthy person need my money? The interest is nothing to him. No. Even when interest is paid to a wealthy person, both the wealthy lender and the borrower who pays it transgress prohibitions. The Torah warns even the borrower with several prohibitions and warnings, unlike other monetary laws. In other monetary laws, we do not have both sides transgressing, as we mentioned. Here, both lender and borrower do. If someone wants to let another person take his property, he may. Someone comes and says, “I want to take your money.” “Fine, take it. I give you permission.” It is his money; he can say, “Take what you want. Here, it’s yours. I’m giving it up.” But one cannot waive the prohibition of interest. I cannot say, “Here, take this interest. I’m giving it to you as a gift, not as interest. I waive my claim to it.” No, the Torah does not allow that. Because of the severity of this sin, the Torah also warns the borrower: “You shall not pay interest to your brother”—meaning, do not give your brother interest on money, interest on food, or interest on anything. So, as we said, both the lender and the borrower transgress prohibitions. The Alter Rebbe adds another point here: this applies to interest on money. You received a hundred shekels and repay a hundred and twenty. But what if you did not receive

11:54 Speaker 2 money? You borrowed half a bottle of oil from a neighbor and return a whole bottle. That, too, is included in the prohibition of interest: interest on money, interest on food. If you received food, return the same amount of food; do not return extra. That raises a problem of interest. “Interest on anything”—whether it is food or even other things, including wood and stones. If you return extra wood or stones, that, too, is considered prohibited interest. Here as well, we have to examine each case and every detail to see how to do it in a permitted way, so that we do not stumble in this, G-d forbid. It makes no difference whether the interest is of the same kind as the loan or something else. You might receive a bottle of cola and return a bottle of wine. You did not return the same thing—or you returned a bottle of wine plus something else. Whether it is the same kind as the loan or another kind, there is a problem of interest, even if the extra amount is worth less than a perutah. That is another thing we do not find with other prohibitions: ordinarily, if something is not worth a perutah, one cannot transgress a prohibition involving it, certainly not a Torah prohibition. But here, even if it is not worth a perutah—if you return just one extra agora because of the time you were given, because you received something and want to give a little more—there is a prohibition of interest. Even if the addition is only a perutah, even if the loan itself was only a perutah. One child lent another child a gogo[?]. How much is a gogo[?] worth? And instead of returning one gogo[?], the other child returns two gogos[?]. That raises a question of interest. It is not worth a perutah, but with interest, that distinction does not apply. Whether or not it is worth a perutah, both are included in the severe prohibitions of interest.

13:54 Speaker 2 The Alter Rebbe continues and mentions some of the punishments, G-d forbid, for someone who transgresses the prohibition of interest. “Anyone who lends at interest is as though he denies the G-d of Israel.” To that extent. A loan, interest—what did I do? He keeps Torah and mitzvos and observes the minor ones as well as the major ones. No: it is as though he denies the G-d of Israel and the Exodus from Egypt, and he will not rise at the Resurrection of the Dead. Pirkei D’Rabbi Eliezer states that someone who, G-d forbid, lends at interest will not rise at the Resurrection of the Dead. There are quite a few well-known stories about these matters. I will not go into them now, but look how severe the punishment is: he will not rise, G-d forbid, at the Resurrection of the Dead because of loans at interest. And even in this world, his assets decline and are depleted. He should not think he profits by making loans at interest. The opposite: not only does he not profit, he loses. His assets decline and are depleted. He may lose not only the interest, but even the principal, G-d forbid, because of loans at interest. There are several letters in which the Rebbe mentions that, G-d forbid, through the prohibition of interest a person’s assets decline and collapse. There is ribbis ketzutzah, stipulated interest, and there is avak ribbis, a lesser form of prohibited interest. What are they? Interest that is prohibited by the Torah is called ribbis ketzutzah because someone stipulated it, as we will explain shortly. When it is not a Torah prohibition—we will see when that is—it is not called ribbis ketzutzah; it is called avak ribbis. When is it one, and when is it the other? For it to be ribbis ketzutzah, first of all there must, of course, be a loan. One person lends another money. When did they agree on the interest? At the time of the loan. Right at the beginning, when he gave the other person the money, the item, or the food, he said: “Listen, I’m stipulating with you, making an agreement with you,

16:31 Speaker 2 setting a condition that I want something extra for this.” It could be a yeshivah student who arrives at the yeshivah very thirsty. He sees half a bottle of his friend’s cola and asks, “Please lend me the cola.” His friend says, “No problem, I’m not stingy. Tomorrow, return a whole bottle to me.” So he stipulates: “I agree to lend you half a bottle of cola now on condition that you return a whole bottle.” Once he returns a whole bottle, he is returning more, and it was stipulated from the outset. That raises a question of a Torah prohibition of interest. So, first of all, ribbis ketzutzah is when they agreed on it from the start. They put it in a document or a contract, or agreed to it orally, but the lender demands extra for what the borrower received. That is ribbis ketzutzah: something stipulated in advance. It is prohibited by the Torah. Another condition for ribbis ketzutzah, interest prohibited by the Torah, is that it must be a loan: one person lent another money. Sometimes one person owes another, but the debt did not arise from a loan. It arose from a sale—or, in the language of the Sages, buying and selling. One person bought something from another, and the purchase created a debt. He went to the grocery store, did not have the money to pay for what he bought, and put it on his tab. Now he owes the grocer money. That debt did not originate as a loan. It has become a loan as well, but it did not begin as one. It began with a purchase: he bought food, drinks, and other products at the grocery store, so he owes the grocer money. Here, even if interest was stipulated, it will not be prohibited by the Torah, because this is a debt from buying and selling, not a debt from a loan. It will be

18:34 Speaker 2 Prohibition—it would be avak ribbis, rabbinically prohibited interest. The Sages decreed that in all these cases, including buying and selling, it is forbidden to lend at interest and forbidden to receive an additional payment. But this is considered avak ribbis, not ribbis ketzutzah, interest fixed in advance. What practical difference does it make whether the interest is prohibited by the Torah or by the Sages? What difference does it make whether it is ribbis ketzutzah or avak ribbis? One difference is whether the borrower can demand the interest back. Someone lent another person ten thousand shekels and asked to receive eleven thousand shekels back. The other person accepted the loan and, a year later, repaid him eleven thousand shekels. This was ribbis ketzutzah, prohibited by the Torah: the interest was fixed as part of the loan. Now the borrower learns that this was forbidden, and he wants the thousand shekels of interest back. He can get it back. The lender is obligated to return that money to him. Not only that: if the lender refuses, the borrower can sue him in beis din, and the judges can compel him to return the interest. So that is a practical difference between a Torah prohibition and a rabbinic one. With Torah-prohibited interest, you can sue to recover it in beis din. With rabbinically prohibited avak ribbis, you cannot sue in beis din to recover the money, but here too there is an obligation to fulfill one’s duty before Heaven. The lender is obligated to return the interest to the borrower. The Shulchan Aruch says that he must return it to the borrower to fulfill his duty before Heaven. So in both cases the lender must return it to the borrower. The difference is that when it is prohibited by the Torah, the borrower can sue in beis din and the judges will compel the lender to pay. When it is prohibited by the Sages, he cannot sue in beis din, but the lender must nevertheless return the money to the borrower to fulfill his duty before Heaven.

20:54 Speaker 2 That is one of the differences between a Torah prohibition and a rabbinic one. We said there has to be a loan. Sometimes something looks like a loan but is not, and when there is no loan, there is no prohibition of ribbis either. For example, I took a taxi. The driver took me from one place to another and was very courteous and pleasant. He even helped me carry my suitcases beyond what he was required to do. I want to give him a tip. The ride cost fifty shekels, and I want to give him another five shekels as a tip. Is that permitted or forbidden? We said it is forbidden to add to what someone is entitled to receive. Is there a problem of ribbis here? No, there is no problem of ribbis. Why? Because there is no loan here. The driver gave me a ride, and I arrived home. Now that I have arrived home, it is time to pay. There has not yet been any loan. At the time of payment, you can pay and add to the amount you are required to pay. The fare is fifty shekels; add another five or ten shekels as a tip. There is no problem at all. But if you arrive home and have no money, you know the driver and say to him, “Oh, I’m sorry, I don’t have any money here. I thought I would. You’re my regular driver; I know you. I’ll give you the money tomorrow.” The driver says, “No problem.” He drives away, and you meet him a day or two later. You feel bad that he had to wait a few days, so now you want to add a tip. You want to give him a little extra money because he waited for his payment. That is already forbidden. Here there was a loan: he was supposed to receive payment a day or two earlier, and he waited two days for it. Now, when you repay him—and we see that the Alter Rebbe writes about this very, very

22:59 Speaker 2 sternly—at the time you repay a loan, you may not add anything. You cannot now give him an extra gift, money, flowers, or chocolate. No. There is a loan here; you repay the loan and add nothing else. A person goes to a restaurant and eats. There was a waiter, and the waiter was very nice and pleasant. You want to leave him a twenty-shekel tip? No problem. There was no loan here. If there is no loan, there is no problem of ribbis. You can pay for the food you ate and the service you received, and you can add a tip. There is no problem with that. So we always check whether there is a loan. If there is a loan, there is a problem of ribbis. If there is no loan, there is no problem of ribbis, and you can give something extra. Another example along the same lines: A child gets on a bus. As we know, today there is a Rav-Kav card that he loads for himself, and his friend says, “Oh, I forgot my Rav-Kav. Please validate my ride. Please use your Rav-Kav for me too.” All right, he uses his Rav-Kav for him. Now how does the friend want to repay the child for what he received? If the next day the second child uses his Rav-Kav twice, once for himself and once for his friend, he is returning exactly what he received, and there is no problem. He received a bus ride, and the next day he provides the other child with a bus ride. That is perfectly fine. But what if he wants to pay him? He has just received a bus ride. How much does it cost? Rav-Kav is a little complicated, because we know that the fare shown is 5.90 for a city ride, and—but in practice he is under eighteen, say a fifteen-year-old boy, so it does not cost him 5.90; it costs him 2.95. So how much did he actually spend

25:12 Speaker 2 for his friend? 2.95. His friend wants to pay him back 2.95. That is already a problem—how do you pay back an amount like that? But first: may the first child, the one with the Rav-Kav, say to him, “Do you want me to use my Rav-Kav for your ride now? I want ten shekels”? He is selling him that validation, that ride, for ten shekels—or six shekels, or seven shekels, whatever price he wants. Is that permitted? At that point it is permitted, because there is no loan yet. They both get on the bus, one pays for the other, and at the same time the other takes out ten shekels and pays him. There was no loan, and he can pay him ten shekels even though it cost him only 2.95. But suppose he has no money right now, or he does not want to pay ten shekels; he wants to pay him what it actually cost. So he tells his friend, “All right, I owe you 2.95.” A day or two passes, and he wants to pay him back. How do you pay back 2.95 now? Can he give him three shekels? Does he have to give him 2.90? How do you repay a debt when the amount is not a round number and is difficult to pay back, especially today, when there are no five-agorot coins at all? How do you repay that amount? As we said, if the loan was 2.90—two shekels and ninety agorot—repaying three shekels is forbidden, because you are adding another ten agorot for the loan. That is forbidden. Here, since the amount was 2.95, you may repay three shekels. Why may you repay three shekels? Because you are not paying extra because you have money on you right now, or because you feel like it. There simply is no

27:12 Speaker 2 Five agorot. Right, you can write a check for five agorot, but otherwise you can’t pay that amount in cash. We have the law for rounding agorot, and it’s accepted in all stores and everywhere else as the way amounts are rounded. If you go to the supermarket, pay in cash, and owe 400 shekels and 22 agorot, it becomes 20 agorot. Twenty-three becomes 20, and 24 becomes 20. But if it’s 25, 26, 27, 28, or 29 agorot, you’ll have to pay 30 agorot. From zero through four, you round down; from five up, you round up. So 2.95 is three shekels, and you can give him back three shekels. Someone borrowed money from a friend. A girl in seminary borrowed from a friend who had bought her something for nine shekels. Fine. The next day she wants to pay her back. She doesn’t see this friend every day, and finally she meets her. She wants to give her nine shekels, but all she has on her is a ten-shekel note, so she gives her friend ten shekels. Her friend says, “Wait, there’s a problem of interest here. I gave you nine shekels. What can I do?” Maybe she can give her the extra shekel as a gift? The Alter Rebbe writes, “With any interest, even interest prohibited by rabbinic law, a gift or waiver cannot make it permissible.” You can’t say, “Fine, I’ll give you nine shekels to repay the loan and one more shekel as a gift.” No, that doesn’t work. It’s forbidden. “With any interest, even interest prohibited by rabbinic law, a gift or waiver cannot make it permissible. Even if the borrower says, ‘I’m giving it as a gift,’ one may not give it and the other may not accept it.” The lender may not accept it, and the borrower may not give an additional gift. “It’s not for the loan; it’s a gift”—

29:35 Speaker 2 it makes no difference. It’s forbidden. Yoreh De’ah. Hakadosh Boruch Hu determined that a loan is free, with nothing added, because all interest in the world is, in a sense, a waiver or a gift. It’s interest. “I’m willing to give you 120 shekels in return for 100, or 1,100,000 shekels in return for a million.” I’m willing—genuinely willing—to give you something extra. No. All interest in the world is, in a sense, a waiver or a gift: merchants and farmers, who regularly need to borrow, give the interest as a wholehearted gift. They have no problem with it. They need the loan and are wholeheartedly willing to give additional money, something extra, in return. It wasn’t taken from them wrongfully, by force, or against their will. They want to give it. The Torah comes and forbids it. It isn’t up to you. You don’t have the authority to decide whether to give more when it comes to a loan. But the Torah did not allow this waiver; it forbade this waiver or gift. So the Sages also forbade interest under rabbinic law. In that case, can she give her friend ten shekels back? What does she do? Her friend has no change. Are they supposed to start going around to stores looking for change? Everyone knows how hard it is to find small change. Or wait an hour in line at the bank just to get some change? So what’s the solution? If someone has checks and wants to write a check for nine shekels, there’s no problem. But if not, what do you do? One solution is to give her ten shekels. “I’m not giving you ten shekels in repayment of the loan. Of these ten shekels I’m giving you now, nine are repayment of the loan. What about the extra shekel? That shekel is mine, not yours. I’m placing my shekel with you now, as a kind of loan. I’m lending you my shekel, and I ask

31:44 Speaker 2 you to put that extra shekel into tzedakah at the first opportunity.” Tzedakah on whose behalf? Not on her behalf, because it isn’t hers. “I’m giving you an extra shekel, and you’ll give that shekel to tzedakah on my behalf”—on behalf of the person who lent her the shekel. That way there’s no problem of interest. She received the nine shekels she was owed. She received the extra shekel as my agent, to put it in a tzedakah box tomorrow, the day after, or whenever she has the chance, on my behalf. So there’s no problem of interest. If someone is being repaid a loan and the borrower doesn’t have the small change needed to pay the exact amount, the lender can accept the money on condition that the extra amount is not accepted as repayment of the loan. It’s money that the recipient owes back to the person who gave it. You can return the shekel to him the next day; there’s no problem. And if you won’t see him and don’t want to go to the trouble of finding him over that shekel, then, with his consent of course, since it’s his money, you can give it to tzedakah on his behalf. So we’ve found a way to repay a loan when we don’t have small change in our pocket. It’s very common for people not to remember the amount of a loan. Exactly how much did I borrow from him? It could be money or groceries. Someone borrowed six potatoes from his neighbor. Later he no longer remembers: did I get six potatoes, seven, eight? He doesn’t remember exactly how many he took. How many can he return? Can he give back seven, eight, nine, ten? That would be interest. If I received six, I have to return six, but I don’t remember. And if I return less, I haven’t repaid the loan either. What do you do in that situation? Or with money: I borrowed from a friend, and I don’t remember—I vaguely recall it was 50 shekels, 60 shekels, 70 shekels. I don’t

33:48 Speaker 2 remember exactly, and neither does he. Both sides want the loan repaid. The lender and borrower want to settle it, but neither remembers the amount. How do you repay it without violating the prohibition on interest? The Ra’avad[?] already writes that when you return something extra, but you aren’t returning it because of the loan, because the lender had to wait, or because of the time that passed—rather, you return the extra amount because you’re uncertain—there is no prohibition on interest. Take the potatoes: you received six potatoes, and you don’t remember whether it was six, seven, or eight. But you’re certain it wasn’t ten. That much you know. Maybe nine, maybe eight, maybe seven, maybe six. You know it was six, seven, eight, or nine, but definitely not ten. So you can return nine potatoes, because you want to return the largest number you might have received. You aren’t violating the prohibition on interest, because you aren’t giving extra as interest. You’re returning them because you don’t know how many you received. You can return up to the highest possible number. But if I round it up to ten, that’s already forbidden. That’s interest; now you’re returning extra. The same goes for money, as we said. You borrowed 50, 60, or 70 shekels, and you don’t remember. You’re certain it wasn’t more than 70 and certain it wasn’t less than 50, but you don’t remember whether it was 50, 60, or 65. Neither the borrower nor the lender remembers. You go to the lender and say, “Listen, do you remember how much it was?” “I don’t remember either. I remember it was between 50 and 70.” Then you can give him back 70 shekels.

35:48 Speaker 2 Seventy-one is already forbidden. Seventy-eight, a hundred—those are certainly forbidden. That is extra; that is interest. But you can repay up to seventy, because that covers the uncertainty about how much you owe. When you are repaying to cover a doubt, there is no prohibition of interest, and you may repay him that amount. Another important halachah concerning interest: You may not repay more. What does “repay more” mean? The extra can take several forms. It can be more in value, more in quantity, or better in quality. In all these cases, repaying more is forbidden. In value, of course: You received a bottle of wine worth fifty shekels, and you return a bottle of wine worth sixty shekels. That is something different, and there is a prohibition of interest here. In quantity: You received three-quarters of a kilo of flour, and you want to return a kilo of flour. That, too, is prohibited as interest because of the extra quantity. Or in quality: You received, for example, a bottle of cola—let’s use an example from this country—a bottle of Pepsi, Pepsi-Cola, and you want to return Coca-Cola. They are both cola, but the prices are different. Pepsi is cheaper, a shekel and a half cheaper than Coca-Cola. You are returning something of better quality, and that is forbidden. It is worth noting that these things can change. Not because the halachos change, but because circumstances change. For example, I heard that in Brazil Pepsi-Cola is more expensive than Coca-Cola, so there it would be the opposite. There, if you borrowed Pepsi-Cola, you can return Coca-Cola if the lender is willing to accept less in return. He is not receiving more. It is always preferable to return the very same thing, but if you return one kind of cola for another there, the prohibition works the other way around. There, if you received Coca-Cola, you may not return Pepsi-Cola, because Pepsi costs more there. And they say that in the United States, the prices are the same.

38:15 Speaker 2 Pepsi-Cola and Coca-Cola cost the same there, so there is no problem. If you received Pepsi, you can return Coca-Cola. If you received Coca-Cola, you can return Pepsi, because the price is the same. Let’s add that this does not depend on what you paid. It depends on the place. As the Gemara says, there is a place where prices are high and a place where prices are low. He gave me a bottle of wine. He may have bought that type of bottle, that brand, for a certain amount, while I don’t have time to go to the supermarket as he did, and I want to buy the bottle somewhere more expensive, somewhere more upscale. He paid thirty shekels for that wine; I have to pay forty shekels for it. Am I violating the prohibition of interest? No. You received wine, and you are returning exactly the same wine. There is no prohibition of interest here. You, too, could go to the supermarket as he did, buy it for thirty shekels, and return it to him. You decided you didn’t have time to go to the supermarket. You went to a more expensive grocery store, paid forty shekels, and returned it to him. There is no problem of interest here, because you returned the same thing, with the same value. Even if he received it as a gift—perhaps he got it as a gift and paid nothing—there is no problem. You returned the same product, with the same value. But what if I want to return a product in a place where it costs more? I met a friend in Jerusalem, and he lent me a bottle of Coca-Cola—a can of Coca-Cola. Thank you; I owe you a can of Coca-Cola. The next time I meet him, it is Lag BaOmer and we are in Meron, and I want to return a can of Coca-Cola to him there. A can there costs twice what it costs at a grocery store in Jerusalem. Not because there is

40:15 Speaker 2 a different price list there; it is simply hard to get that product there, and the stand—all the stands there—sell it at a higher price. Or take a child who received an ice pop from his friend in Tzfas and wants to return it to him at the Dead Sea. The price of an ice pop at the Dead Sea is much higher than the price of an ice pop in Tzfas. He may not go and buy an ice pop there and return it to him there, because in that location the very same ice pop is worth much more. That is prohibited as interest. You need to wait and either repay him the cost of the ice pop according to its value in Tzfas, or return an ice pop to him in Tzfas. But do not return an ice pop to him at the Dead Sea, where an ice pop is worth and costs much more than it does in Tzfas, where you received the loan. A father comes home with his son from Mesibos Shabbos, from an Avos Ubanim program, and the boy received a bag of chips there. On the way home he has already started eating the chips. They get home, and the younger child, his little sister, starts crying. She wants chips too, and she cries and cries and cries because she wants chips. The father looks around the house, in the cupboards, but there are no chips to give her. So he comes to the boy and says, “Listen, give her your bag of chips. Give her half the bag, and tomorrow I’ll give you a whole bag.” Is that allowed? Lend your sister half a bag of chips, and in return for the loan I’ll give you a whole bag tomorrow. No, it is forbidden. That is interest. People will ask: Can there be a prohibition of interest between a father and son? He is his son, supported by him. How can there be a prohibition of interest here? So you need to know that yes, the prohibition of interest applies between a father and son as well. The Gemara in Bava Metzia, page 75a, says: “Rav

42:32 Speaker 2 Yehudah said in the name of Rav: A person is permitted to lend to his children and the members of his household with interest.” The initial view is that one may lend to them with interest to let them taste what interest is like, so they feel that losing money is unpleasant. Maybe that would be a good thing. “But that is not so,” the Gemara says. No, that is not the halachah, and it is forbidden to do so, “because they may become accustomed to it.” It is forbidden to lend to children with interest—a rabbinic prohibition—because they may become accustomed to it. What does that mean? They will get into the habit. Interest has two sides. There are times when you have to pay interest and lose money, which is unpleasant for you, and there are times when you earn the interest. You get a taste of interest, and it feels good. That could, G-d forbid, get you into the habit of asking for more and more interest. Therefore, the Gemara rules, and the Shulchan Aruch likewise rules in section 160, paragraph 8, that it is forbidden to lend to children with interest, lest they become accustomed to it and continue doing so. So what do you do? The little girl, his sister, is crying, and the boy has half a bag of chips, but he is not prepared to give it to his sister just like that. The best thing is to tell him, “Give half the bag of chips to your sister, and tomorrow I’ll bring you half a bag.” By giving your sister half the bag, you are fulfilling the mitzvah of lending. You are fulfilling a mitzvah from the Torah. You are teaching him to make an interest-free loan as one should, as the Torah wants, and he will get back what he gave. That is one option. Another option is: “Give your sister that half-bag of chips. It isn’t a loan or anything else, and you aren’t doing it on my behalf. Give it to her. Give your sister the half-bag of chips, and tomorrow I’ll give you something else in return. Maybe I’ll give you—we’ll see tomorrow what I want to give you. I’ll make it up to you,”

44:53 Speaker 2 But with something extra, without something extra—I’m not promising anything. Give her a gift, and I’ll see what I can do tomorrow. It’s not a loan. Right now, one person is giving another a gift, and tomorrow, if he wants, he can give the child half a package or a whole package, because there was no loan here. But to say, “Give a loan on my behalf, and I’ll give you something extra,” is prohibited because of interest. Another point is interest in the quantity returned. We said you may not return more. What does “return more” mean? If I borrowed half a bottle of cola from my neighbor, do I need to take a measuring tape and measure exactly half a bottle, so I don’t, G-d forbid, return a little more or a little less? Does it have to be exact to the millimeter? Certainly not. It’s normal to return approximately the same amount. You received half a bottle; return half a bottle. You received three-quarters of a bottle; return three-quarters of a bottle. Return more or less what you received, without deliberately adding or subtracting. That’s fine. Half a kilo for half a kilo, three-quarters of a kilo for three-quarters of a kilo. We always work with approximate amounts. With some things, it gets a little more complicated. A woman went to her neighbor because she needed eggs to bake challahs. She asked for two or three eggs. She received three eggs from her neighbor, and a day or two later, after going to the grocery store, she wants to return them. She received three eggs and wants to return three eggs. Excellent, but there’s another issue: not every egg is the same size. What if the neighbor gave her medium eggs? Not the smallest, not small—medium. Not large or extra-large. And the woman wants to return large eggs. They’re bigger; that’s an addition. So, as long as we’re talking about two or three eggs, even if she received medium eggs and wants to return large ones, it’s still

47:13 Speaker 2 something people aren’t particular about. They don’t actually check how many agorot of difference there are between them. It’s considered something the lender waives, and she may return large eggs. But if she received small eggs, she can’t return large ones; and if she received medium eggs, she can’t return extra-large ones. If she received ordinary medium eggs and has now bought medium organic eggs for herself that cost twice as much, she can’t return three organic eggs worth twice as much to that woman. She received three eggs; she should return three eggs. With medium eggs, though, she can return large ones. What if she received a carton of eggs? She received twelve medium eggs. Here she can no longer return large eggs, because at the grocery store or supermarket there’s a noticeable price difference between medium and large, even if it’s only a shekel or a shekel and a half. When someone buys something at the grocery store and the shopkeeper owes him change, he doesn’t say, “A shekel is nothing.” He waits for his change before leaving. In other words, people are particular about getting change, even a shekel or less. So if there’s a difference of at least a shekel and a half between medium and large, and she received a carton of medium eggs, she must return a carton of medium eggs—not large. She can’t return large in place of medium. Medium for medium, large for large. Each person must return what they received. Another point about interest: we mentioned that the prohibition of interest applies when there’s a loan. Now, sometimes a loan arises even though one person didn’t ask another, “Lend me money.” It comes about in a different situation. For example, someone works for an employer. He teaches in a cheder, or she’s a teacher or kindergarten teacher at a school, and there’s a financial obligation between employee and employer. He or she

49:23 Speaker 2 is supposed to receive a salary on the tenth of the month, but the institution runs into difficulties and can’t pay. There isn’t a debt here yet. When does it become a debt? On payday. On the tenth of the month, the director or employer has to pay the employee. While the person is working, there’s no loan. Then payday arrives, and payment is due. The director or employer comes and says, “Listen, things are difficult this month. I can’t pay you today. In two weeks I’ll pay you, with an extra fifty shekels, an extra hundred shekels.” You might say that perhaps this is permitted—there was no loan. No, it’s absolutely forbidden. It may even be fixed interest. A loan has now come into being. The time for payment has arrived. Once payment is due and you don’t pay your employee, you still owe him his wages, but you may not add money to that payment in compensation for the delay. That is prohibited interest. It’s true that the law requires compensation for late payment, and we’ll see later, G-d willing, how to deal with that, because it is forbidden to pay interest. You may not pay extra for a delay in payment. So even though this didn’t begin as a loan, but as wages owed by an employer to an employee, you can’t add anything for paying the salary late. This can happen even with a gift. How can that be? I can decide how much I want to give him—a hundred shekels, two hundred shekels, a thousand shekels. How could interest be involved? A person says to his friend, or to a bar mitzvah boy, “I’ll give you a gift. I’ll give you a hundred shekels.” A person makes a commitment to his son-in-law, boruch Hashem, when his daughter becomes engaged. He commits to giving his son-in-law, or the other family, a certain sum of money.

51:49 Speaker 2 Now, he has committed to giving ten thousand shekels, twenty thousand shekels, fifty thousand shekels. As long as the time set for that commitment hasn’t arrived—the time when he’s supposed to pay the sum—there’s no loan, no interest, and no problem. You can give gifts to the other family, to your son-in-law, and so on. There’s no loan and no interest. But once the time for fulfilling the commitment arrives, when you’re supposed to pay, you can’t come to the other family on the wedding day and say, “Listen, I committed to giving you fifty thousand shekels today, but I don’t have it. I’ll give you fifty-five thousand shekels in a month.” That is prohibited interest, because once payment is due, you’re obligated to give the money. From that point on, even though it’s a gift, once you’ve committed to it, you must give that amount. You may not add compensation for late payment. The Beis Yosef already cites the Rashba as saying that when making the commitment, a person can tell the other family, “Listen, either I’ll give you fifty thousand shekels at the wedding, or I’ll give you sixty thousand shekels a year later.” He hasn’t decided yet; he’s leaving himself the option of how large a gift to give. But if he didn’t do that and said, “On this date I’ll give you fifty thousand shekels,” he must give fifty thousand shekels. If he’s late, he still owes fifty thousand shekels. He may not add anything afterward, because the time for payment, the time for fulfilling the commitment, has arrived. He may not add anything to it. That’s when it’s a gift, a commitment, a dowry. It could be for a bar mitzvah or anything else. Once you’ve committed to someone, “I’ll pay you,” or, for a bar mitzvah, “Which book do you want? This book—fifty”

53:52 Speaker 2 Shekels, no problem. Go buy it, buy that book, and I’ll pay you fifty shekels. In the meantime, he completely forgot that he had told this bar mitzvah boy he would give him fifty shekels for the book. Six months go by—it’s his nephew. After six months, the nephew meets him and sort of hints, “Uncle, did you buy the book you told me about?” “Oh, wow, how could I have forgotten to give you the fifty shekels? Listen, I feel bad. Take seventy shekels. Fifty is what I promised you, and the other twenty is a gift because I paid you late.” That is forbidden. Again, once you promised that boy fifty shekels, especially when he went and bought the book for fifty shekels on the strength of your promise, you can give him fifty shekels. No extra amount—not sixty, not seventy, nothing else. You want to give him a gift in another month? We can talk about that. There are laws of interest given in advance and interest given afterward: when it’s permitted, when it’s forbidden, and how. But right now, at the time of payment, you paid late; you must not add anything. You promised fifty shekels, so give him fifty shekels. What should someone do if he accidentally caused damage? He dropped his friend’s phone, broke something on his car—there’s damage here, and he wants to pay what he owes for it. Say he hit the car, and the repair costs two hundred shekels. But when they fix it at the garage, his friend will get—let’s say the headlight broke. The headlight you broke wasn’t worth two hundred shekels; it was worth less because it was already used. Now you’re giving him a new headlight, something better. Someone accidentally broke his friend’s phone. The phone was already old, and now you’re giving him a newer phone. So

56:10 Speaker 2 that’s an extra benefit. He isn’t getting the same thing he had before. You should know that the prohibition of interest does not apply to damages. When does it apply? When it arises from a loan, as we discussed earlier [unclear]. But with damages, there is no prohibition of interest. Someone broke another person’s property; he can go to a garage and give him a new replacement. How much does it cost? Two hundred shekels. “I’ll give you two hundred shekels, plus fifty for the aggravation and the time you’ve lost because you have to go to the garage. Here, take two hundred and fifty shekels.” No problem. With damages, you may pay extra because there was no loan here. This is payment for the damage. Let’s move on to another topic in the laws of interest: what’s called a heter iska. We mentioned that there are problems that need solutions when one person does want to lend another money at interest, or when someone has no choice but to pay interest—whether to the gas company, the electric company, for municipal taxes or water—or with savings that he chooses to invest, or with things outside his control that he didn’t choose, such as the Savings for Every Child program, mandatory pension contributions, and the like, where the money is invested and earns interest. How do we solve this problem? For that, there is something called a heter iska. What is a heter iska? Some people used to think—and still think—that a heter iska is a sort of amulet. You go to a rabbi, pay him, he writes you a heter iska, you put it in your store, and everything is perfect. Everything’s fine. It’ll bring you blessing and business, there’ll be no prohibition of interest, and everything will be fine and wonderful. A sort of amulet. Of course, a heter iska is not an amulet. Some people think a heter iska is a certificate of kashrus: rabbis come and inspect his business, his store, his factory, to see whether everything is being run properly, whether he pays on time, whether he doesn’t

58:43 Speaker 2 pay interest, or perhaps doesn’t charge interest, and that’s it. Now he gets a nice certificate saying he has a heter iska from this beis din. Right, now he can do whatever he wants because he has a certificate of kashrus. Fine, they’ve placed some restrictions on him here and there, but that’s it; he can sleep soundly. So a heter iska is neither an amulet nor a certificate of kashrus. What, then, is a heter iska? A heter iska is essentially a contract. A heter iska is essentially a document. Here’s an example of a heter iska document. It’s a simple document that one person can draw up with another so he can receive interest. We’ll see how, and how much one can receive from the other. When a factory needs a heter iska, or a financial institution needs one—a bank, an insurance company, an investment company, and the like—it doesn’t end with a document like this. It runs to several pages. It’s a long contract that the best lawyers spend many hours working on, both on behalf of the rabbis and on behalf of the financial institution, to find wording that suits both sides. How do you make a heter iska so that neither side violates the prohibition of interest? So how is it actually possible to do such a thing? If the Torah forbade interest and was so strict about it, can I just take a document, write a few things, and suddenly it’s permitted to charge interest? The lender doesn’t violate the six prohibitions, and the borrower doesn’t violate the prohibitions that apply to him? How can that be? The Tzemach Tzedek compares it to a pruzbul. You know there’s a pruzbul document, because after the Shemitah year—Shemitah cancels all the loans made before it, and you may not ask for the loan money back afterward. Already in the time of Hillel the Elder, the Sages saw that the door was being closed to

1:01:12 Speaker 2 borrowers. Lenders didn’t want to lend because they wouldn’t get their money back. So they found a solution to preserve the Torah’s positive mitzvah to lend—there’s a positive mitzvah for one person to lend to another. You draw up a pruzbul document. A pruzbul essentially says that instead of my lending to you, I transfer all my debts to the beis din. Now it isn’t a loan from me to you; the debt has been transferred to the beis din. I can’t demand repayment of the loan from you after the Shemitah year, but the beis din, which isn’t an individual but a body, can demand repayment. That’s how we get around the problem of Shemitah canceling debts: we can lend, and we can demand repayment after Shemitah if a pruzbul was made. So how does a heter iska document work? Essentially, we make a contract. We make a contract between the two parties to change the nature of the loan. Instead of its being a loan, part of the money becomes a deposit and part of the money remains a loan. It depends. There are several kinds of heter iska documents, each different from the others, but broadly speaking, we want to change the nature of the transfer of money from one person to another. After all, suppose I have a hundred thousand shekels, or a million shekels, and I want to give it to someone else to buy an apartment for me. He goes to a lawyer, goes to the seller, buys an apartment for me, registers the apartment in my name. He bought it for me; everything is registered in my name. He worked, he made the effort, and he’s entitled to a brokerage fee, to payment for his work. I can pay him for that. There’s no problem of interest here. He didn’t receive a loan; he invested the money for me. Afterward, I enjoy the returns from the apartment, the rental income, and he receives his brokerage fee, his payment

1:03:32 Speaker 2 for his work. Yes, what we want, essentially, is for a loan between two parties to become a business arrangement, to become an investment. Instead of all the money remaining with him so he can do whatever he wants with it, he has restrictions. Part of the money becomes an investment, part a deposit. We won’t go into all the details now. The point is that it isn’t an ordinary loan. Once it isn’t an ordinary loan, you can receive the profits from the investment. I invest in someone else’s store, his business, his shares—anything I want to invest in—and receive a profit on it. Not because it’s a loan, but because I invested with him. Broadly speaking, that’s what we’re trying to set up when there’s a heter iska document between two parties. First of all, since it’s an investment, I can’t demand whatever rate of interest I want. I can’t draw up a heter iska document and say, “Come sign here that you’ll give me twenty-five percent a year on my money.” That’s a lot. There’s no normal investment today that yields that kind of return, twenty-five percent interest. At a bank you get less than one percent. There are various investments, there are apartments—three percent, five percent—but not twenty-five percent. So if the lender writes in a heter iska document that he demands twenty-five percent a year or more from the borrower—sometimes that can happen. Twenty-five percent a year sounds like a lot, but when you write it as a monthly figure, all you’ve written is, “Pay me three percent a month.” Three times twelve, that’s already twenty-six percent. So... ah, three times twelve is thirty-six percent. That, then, is forbidden. A heter iska document won’t help in this case, because we say that there is

1:05:33 Speaker 2 This is an investment, and an investment follows the rules of investing. So a heter iska allows you to receive a return on an investment, but not an excessively high return. Halachic authorities mention a limit of sixteen percent. Up to sixteen percent can be requested in a heter iska document as an interest payment, because there is, in effect, a form of investment here. Both parties must sign the heter iska for it to be valid. Now, one of the problems is this: a particular business or financial institution has a heter iska—that’s fine. But does that mean I’m covered? Can I rest easy? Can I borrow from them with interest? Baruch Hashem, after a great deal of work by many organizations and batei din, going from bank to bank, from investment company to investment company, to insurance companies and the like, almost everyone in this field now has a heter iska. Let’s start with the banks. Banks in Israel, Jewish-owned banks, have a heter iska. I should add that the whole issue of interest, of course, applies when a Jew is involved. It is permitted to lend to a non-Jew with interest and to receive interest from a non-Jew. With banks abroad, there is no problem if the owners of the bank are non-Jews—but you have to check who the owners are. All the employees might be non-Jews, but what about the owners? If the owners are non-Jews, that is fine, provided there is no Jew in the middle arranging the loan. You receive a loan from a non-Jew and pay interest, or he pays you interest—that is fine. But here in Israel we are dealing with Jewish-owned banks. There are a number of letters from the Rebbe about this. People wrote that they were taking out a loan, wanted to take out a loan, or had already taken out a bank loan, and the Rebbe points out that it must be written that the loan is under a heter iska—a heter iska instituted by our Sages. The Rebbe mentions a heter iska, sometimes even by its initials. There is discussion

1:07:42 Speaker 2 about doing it verbally, but it must be under a heter iska. So the banks have a heter iska. I want to borrow from a bank. I want to borrow from a credit-card company; Baruch Hashem, credit-card companies such as Isracard and Cal also have a heter iska. Now I want to swipe my credit card and pay in what’s called “credit” installments, with interest. I don’t mean interest-free installments, which present no problem. I’m at the grocery store or supermarket before Pesach or the holidays, and I have a big purchase. I don’t have enough money in my account to cover it, so I swipe my credit card. Instead of paying the four thousand shekels for the groceries now, I spread it over several payments using credit. The credit-card company charges me interest on the loan it gives me. It pays the supermarket, and I pay it back over the next month, two months, three, four, with whatever interest is added. Usually they charge ten or eleven percent interest on this. The question is: where is the business venture here? Where is the investment? We said a heter iska works when I invest or they invest. Here, the credit-card company gives me a loan, meaning it invests in me. A heter iska helps when there is a venture in which it invests. What exactly is it investing in? The milk? The matzos? The cornflakes I bought? Buying things that are not investments is not an investment. You cannot rely on a heter iska for that. It does nothing; it doesn’t help. In section 42, the Alter Rebbe is very stringent and precise about what one may and may not do with the money when making an iska. If I’m only buying food, there is no iska. So we have to check that there is a business venture. If I want to go to the bank and need

1:10:00 Speaker 2 money from it to buy an apartment, there is an investment here. The bank is investing together with me in my apartment. Over time, the apartment’s value rises. There is an investment here; no problem. I take out a mortgage with interest and have to pay that interest. The bank has a heter iska document. Fine: I’m taking the loan for an investment, to buy an apartment, and everything is in order. But what if I want the money for something else? The halachic authorities write that if you have an investment, you may take the money for other things too. In other words, I’m going to the supermarket now and want to buy four thousand shekels’ worth of food. That isn’t an investment, but I own an apartment. Since I own an apartment, and the heter iska document states that whenever I take a loan under the heter iska, the lender who gives me the money invests in all my permissible business ventures, it applies automatically. Even though I haven’t listed whether I have a home or this or that, when I rely on the heter iska, the lender is investing in all the permissible ventures I have. I say “permissible ventures” because we don’t want impermissible ones—businesses that operate on Shabbos, businesses that deal in interest, and so on. So if I have an asset, I can take out a loan under a heter iska. Up to what amount? Suppose I own an apartment worth a million shekels, but I still owe the bank half a million on the mortgage. The other half million is already mine; I’ve paid that much toward the apartment. So I effectively have half a million shekels here. I can take out loans under a heter iska up to a total of half a million shekels. But what do we do if I don’t own an apartment? If I don’t own one, and I now need

1:12:09 Speaker 2 a loan to make a purchase with interest under a heter iska, can I do that? Without an apartment, there is less of an investment. We need to find something of yours in which the party lending you the money can invest. Do you have a savings plan at the bank? If so, you can take out a loan under a heter iska up to that amount. If you have fifty thousand shekels in the bank in a fixed savings or investment plan, the bank is, in effect, investing in that plan, in those funds. You can take out a loan under a heter iska for that amount. You have no investments—perhaps you have a car. Your car is worth money too. You could rent it out to others; it has monetary value. Perhaps you have diamonds or gold at home that you could rent out or sell. These are things whose value may rise, so they too are investments. But what about a yeshiva student or a young woman in seminary who has no apartment, no car, no investment, no savings plan—nothing? Can they take a loan from a credit-card company or a bank under a heter iska? No. There is no investment here. The bank isn’t investing in anything. There is a leniency mentioned by many halachic authorities that most authorities disagree with. It is the leniency of the Shoel Umeishiv, who accepts that even if a person has no assets at all, if he works and earns a salary, that salary is also considered a kind of investment. On the basis of his salary, he may take a loan under a heter iska up to the amount of that salary. Most halachic authorities disagree. But a yeshiva student who doesn’t even work, who has no job, no investment and no asset, cannot take a loan under a heter iska. A heter iska does not

1:14:20 Speaker 2 help when he wants to borrow money now because he needs to buy something at the grocery store, or for something else that is not an investment. He cannot do that under a heter iska. So let’s remember: a heter iska works when there is an investment, when one party invests in the other. But if there is no investment, the heter iska posted at the bank does not help, because the bank has nothing to invest in when it comes to that young man or young woman. In that case, the interest is still interest, and the heter iska does not help. A heter iska can also be made between two individuals. Reuven can go to Shimon, and they can arrange a loan between themselves with a heter iska—no problem. But what if Reuven already lent Shimon money and asked him for interest? He didn’t know it was forbidden, or he forgot it was forbidden. Shimon has been paying him interest for several years, every month or every year, and Reuven is due to receive the principal later. Now, Baruch Hashem, he learns that there is a serious prohibition against interest here. What can he do? The loan was made two or three years ago. Can they make a heter iska now? Yes. He must make a heter iska immediately. It will not apply to the interest from the past year or two; he will have to return that interest or waive it. He cannot demand interest for the past. He must now make a heter iska, together with a kinyan by the lender and the borrower, so that from this point onward, the money the lender has already given the borrower will be under a heter iska. A Jew approached me, a father whose son is abroad while he is here in Israel. His son needed funds. I think he is a shliach there, with institutions, Baruch Hashem. He needed money for the business ventures

1:16:35 Speaker 2 his livelihood. So the father said, “Let’s do this. I have a bank account in the United States with a credit card attached to it.” He gave him the number, or the physical card, and said, “Use my credit card. You need it for the next few months, and afterward we’ll add up how much you spent on it. You can pay me back when you’re able.” The son was delighted. Great. He took the credit card and used the American card to buy the things he needed overseas. Now, at first glance, everything is fine. The credit card is from a bank in the United States owned by non-Jews, so there’s no problem of interest. But to whom does he have to repay the money? He has to repay his father, who is Jewish. In other words, the son took an American credit card, made purchases with it on credit in the United States, with interest, and now has to repay his father. The amounts due must be paid to the non-Jewish bank, to the non-Jewish credit-card company, with interest. Meanwhile, the father has paid those amounts and kept a record of everything: “My son owes me ten thousand dollars, plus a thousand dollars in interest—eleven thousand dollars.” The interest didn’t go to a Jew; it went to a non-Jew. But now the son has to repay his father eleven thousand dollars, which the father has already paid. Now the son wants to pay his father back. That’s a loan between two Jews. The son may not repay the interest to his father unless they draw up a heter iska agreement between them, so that the loan through the credit card is covered by a heter iska. So here’s something interesting: sometimes a non-Jewish bank creates a more serious issue than a Jewish bank. For example, here in Israel, a Jew

1:18:52 Speaker 2 needed a loan, but he had already taken so many loans from all the banks that they no longer wanted to lend to him. So he went to a friend and said, “Listen, please take out a bank loan in your name for me. I’ll repay you the money plus whatever interest the bank charges.” All right. The friend went to the bank and borrowed ten thousand shekels with interest. The bank has a heter iska, so when he receives the money from the bank, everything is fine. He has taken out a loan. But he doesn’t need the loan for himself; he needs it for his friend. He takes the money and passes it on to him. Now every month the friend asks, “How much did you pay the bank? Eleven hundred? Here’s eleven hundred.” Wait a moment: you’re repaying a thousand toward the principal and giving me a hundred in interest. True, I can pay the bank that hundred in interest because I have a heter iska with the bank. But what about the hundred I’m receiving from him? There’s no heter iska between us. The halachic authorities write that a heter iska must be drawn up between those two parties as well. Are you taking out a loan for someone else? Fine. You can pay the bank interest under the heter iska between you and the bank, but you also need a heter iska between you and your friend, because you gave him that money and he is paying you the interest that you pass on to the bank. And it’s even more serious if the bank is non-Jewish. If you took a loan from a non-Jewish bank with interest and then passed the money on to your friend—you didn’t need the money; it was for him—he now brings you the money so you can repay the non-Jewish bank. In that case, there’s no heter iska at all.

1:20:41 Speaker 2 Why is a heter iska needed? Between the two of them, a heter iska is necessary. You can’t even say that the bank’s heter iska applies to them as well. There is no heter iska between me and the bank, because it’s a non-Jewish bank and doesn’t need one. So with a non-Jewish bank, the problem is even more serious if the two Jews don’t make a heter iska between themselves to allow the interest to be repaid to the non-Jewish bank. It’s very, very important to draw up a heter iska properly, in accordance with halacha. If someone doesn’t know how to do it, boruch Hashem, there are many batei din and rabbis who specialize in this and can help prepare the heter iska document. Continuing with the laws of heter iska, the public has no choice but to learn and understand how to deal with this situation. Boruch Hashem, the state decided to provide savings for every child: the National Insurance Institute deposits money into a “Savings for Every Child” account. The state requires every working person to have both employer and employee contribute to a pension fund, under mandatory pension rules. Some people also want an education fund or another fund, another investment. This money goes to a bank, an insurance company, or an investment company, and they invest it. They invest the money in our names, each person’s in their own name. If I have a pension fund, my money is held by various companies, but it’s my money. It isn’t recorded as belonging to Menora, Clal, or Altshuler. It belongs to me. It belongs to this boy, that girl, this mother, that father. Each person has money there in their own name. In the past, there were exchange-traded notes, and those could be registered in the name of the investing company. A few years ago, or a little longer, the government abolished that arrangement. Now, even when it goes through an exchange-traded note,

1:23:03 Speaker 2 they have to know who the investor is and to whom the money belongs. What do they do with the money? They want to invest it to earn a return. One relatively simple form of investment is bonds. Companies here in Israel—perhaps another time we’ll discuss the whole concept of a limited company and how it works, but from the Rebbe’s words it seems that even a limited company needs a heter iska—are owned by Jews and need money. A company needs money to build a new factory. It needs money to invest in machinery and product development. It wants to increase its income, and it does that [?] by building; to do so, it needs money. Going to a bank and asking for a loan is one option, but the bank has its own terms and interest rates. It won’t lend unlimited amounts to every company, and certainly not always at a low rate. So there’s another option available to a limited company. There are privately held limited companies—thousands of them here in Israel—that can seek money from the public, and there are what are called public companies, whose shares are traded on a stock exchange, such as the Tel Aviv Stock Exchange. Some Israeli companies are traded on exchanges overseas. It makes no difference: it’s a Jewish company, and it wants to issue bonds. What are bonds? Essentially, a bond is a document that says, “I’m giving you this document in exchange for a certain sum. You give me a hundred thousand shekels.” Each bond has an interest rate and a term. There are five-year bonds, ten-year bonds, twenty-year bonds, and you receive interest on the amount you invested with me—usually twice a year. I, the limited company, receive investments from this person and that person and another person, from the public

1:25:36 Speaker 2 These are financial institutions that transfer pension-fund money to those companies, and the companies return the money with interest. So how is that permitted? A Jewish-owned company is paying interest to another Jew. To avoid a prohibition against interest here, there has to be a heter iska. And here we’re talking about thousands of companies. The banks, fine, they have a heter iska, but there are many other companies. Baruch Hashem, some companies have agreed to sign a heter iska, and others have not, yet they continue paying interest to thousands, even millions, of people. Our money might be there too, if we haven’t done what we need to do, and we’re receiving interest. A person may have no idea. He studies in kollel or goes to work, thinks everything is fine, and doesn’t know that his pension fund is invested in a company that pays interest. I’m talking about problems involving work on Shabbos and Pesach too, but the interest is actually the more serious issue here. Once a year he gets a statement from his pension fund: here’s what your pension fund earned. You received one percent, two percent, three percent, four percent, depending on how much is in bonds and how much is in stocks. With both of them—stocks also pay dividends, which are interest, and bonds pay the interest agreed upon from the outset. To make sure we don’t, G-d forbid, violate the prohibition against interest—whether it’s a pension fund, the Savings for Every Child program, an education fund, or any of the various funds, including managers’ insurance—we have to invest the money in accordance with halachah. There has to be oversight. Someone who understands this has to check that the money is invested in a permissible way, meaning that there is a heter iska. Not every company agrees to a heter iska, so I won’t invest in a company that doesn’t have one. Baruch Hashem, today many more companies have agreed to a heter iska,

1:27:57 Speaker 2 so we won’t invest where there is no heter iska. We’ll buy only bonds issued by companies that have a heter iska. We can buy Israeli government bonds, which, baruch Hashem, have a heter iska. There are several letters from the Rebbe about this. The Rebbe was concerned that the Israeli government should have a heter iska for its Bonds—its government bonds. Some issued in Israel had a heter iska, while some issued abroad did not. The Rebbe pressed for both to have a heter iska, and said not to give money or buy such Israeli government bonds if they lacked one. Baruch Hashem, they have a heter iska today. So several rabbinic organizations arose to oversee this. Today we mainly have three rabbinic bodies overseeing the matter. There’s the Haredi [unclear] Committee, which oversees some investments. There’s Glatt Hon, another rabbinic oversight body, and there’s Teshuah Kahalachah, another rabbinic body overseeing it. Each has its own approach. We won’t get into how each one does it right now. One is stricter about one thing and more lenient about another; each has its own approach. Of course, each thinks its approach is the best. All the approaches are acceptable, but you have to follow one of them. Everyone has to check where their money is. How do you check? Simply take your pension-fund statements and look at which investment track you’re in. Today, baruch Hashem, all the companies offer investments in accordance with halachah. Each company gives its track a different name. At Harel, a “Kahalachah” track may be called a “Halachah” track; there’s a government-bond track, an education-fund track called “Kahalachah.” Each has a different name. Usually it’s something like a halachic track,

1:30:06 Speaker 2 a Halachah track, a savings track, or a “Top Halachah” track. They all have them—all the companies: Meitav Dash, Altshuler Shaham, Phoenix, Harel, Clal, Menora Mivtachim, Migdal, Makefet, Psagot. Baruch Hashem, they worked on this for a very long time with lawyers so that it would also hold up in court. More than once, the heter iska of these companies has come before a court. The court treats a heter iska document as a legal document. And yes, baruch Hashem, they have given legal force to this document, signed by the company’s board of directors, stating that the investment is made under a heter iska. That can have practical implications: sometimes, if a person, G-d forbid, goes bankrupt, perhaps he won’t have to pay the bank for his losses, or something similar, because there was a heter iska. So everyone needs to check which track they’re in. If you haven’t changed your track yet, call the company—the investment company, the insurance company, or your agent—and ask, “Tell me, which track am I in? Can you move me to a Halachah track? A kosher track?” With every type of savings, it’s possible to switch to a kosher, halachic track. Then, instead of your money being invested in companies that pay interest that may even be prohibited by Torah law, it will be invested in a company that has signed a heter iska. The interest will be received in accordance with halachah, and you won’t violate the prohibition against interest. Your assets will be protected; your money won’t be lost or depleted, because you’re observing halachah on this very important matter. The Savings for Every Child program is the same. Everyone receives money from National Insurance if they’ve opted in. When a child is born, baruch Hashem, you have to decide where the money will go. There’s a bank option and an investment-company option. If you chose a bank for your son or daughter, there’s no problem, excellent—all the banks have

1:32:24 Speaker 2 a heter iska. If you chose to have that money invested until your daughter turns eighteen or twenty-one through an investment company, insurance company, or financial company, you need to make sure it’s in a halachic track, a kosher track, one where the money goes to the right places and not, G-d forbid, into something involving prohibited interest. So everyone here has something to do: check with your agent or insurance company which track your money is in. It takes a few pages and a few signatures to move from a non-kosher track to a kosher one, so that at least from now on, all our money, as an observant community, will be in kosher tracks only—tracks that receive interest in accordance with halachah, not in violation of the prohibition against interest, G-d forbid. Another point about the prohibition against interest is that sometimes a person doesn’t realize he actually needs a heter iska document. He thinks he doesn’t have any loans. But anyone who has a business, a store, a public institution, or a gemach should be aware that he very, very often needs a heter iska. If he has a store and pays suppliers, he doesn’t pay every supplier right away. He receives merchandise and pays later. We need to discuss this, with Hashem’s help [unclear]: discounts for early payment, later payment—sometimes there’s a problem of interest here. A customer comes in and pays you for a product you don’t have in the store, so you have to order it for him. The product may go up in price in the meantime, but you give it to him at the original price because he already gave you the money—a loan. There’s a prohibition against interest here. So because the prohibition against interest applies in many situations, someone who has a business, a store, or the like should draw up a heter iska document as soon as possible, so that all the payments, all the money he receives or pays, will be

1:34:42 Speaker 2 Under a heter iska, and then he won’t have a problem with interest. Someone told me that he works at an educational institution. He’s the director, and he receives letters from his employees’ pension fund saying that because he didn’t pay on time, he now has to pay the pension fund with interest. What does he do? Sometimes an employee can make a demand—if he went to court, or I’m not sure exactly how he brought it up—but under the law, if he received his payment late from the director, from his employer, he has the right to demand, as we mentioned, payment with interest. How is the director now supposed to pay interest to the employee or the pension fund and so on? He’s not allowed to pay interest. So if he draws up a heter iska document for his business, his institution, his cheder, or his seminary, it will cover all these things too. It’s almost absurd. I remember once receiving a letter from the pension fund because of some delay—I don’t remember, something in the computer—and I had to pay sixteen agorot in interest. They sent a letter whose stamp cost more than sixteen agorot, telling me to pay them an extra sixteen agorot because there had been a delay and they were demanding interest. So if I have a heter iska and they have a heter iska, there’s no problem, and no one will, G-d forbid, violate the prohibition against interest. We mentioned that, baruch Hashem, the banks have a heter iska, and we approached the municipalities. Most municipalities have a heter iska, but not all of them. You can check the business kashrus guide from Rabbi Indet[?]’s beis hora’ah to see which municipalities have a heter iska and which do not. But there are still large organizations that don’t have a heter iska. I don’t think all the gas companies have one yet.

1:36:59 Speaker 2 If you pay late, they demand interest from you. It could be a building committee that has to pay for elevator service, didn’t pay on time, and the elevator company demands payment with interest. So how can you now pay them interest if it’s forbidden? Do they have a heter iska? Not all of them do. Many companies still don’t have a heter iska, and before you sign a contract with a particular company—gas or whatever it may be—you need to check whether they have one. Of course, ideally you should always pay on time and avoid getting into these situations of late payments and interest. But sometimes, after the fact, you find yourself being charged interest. How can you pay it if neither you nor they arranged a heter iska? We should ask everyone to get a heter iska. The more we ask these companies to have one, the more of them will. Recently there was one large health fund. All the health funds had signed a heter iska except one. They claimed they didn’t charge their customers interest, so people brought them evidence, documents: “What’s this? Here’s a demand.” “No, that’s not us. We sent the debt to a lawyer, and the lawyer demanded the interest.” Yes, he’s demanding the interest both for himself and for you. After they saw all these letters—despite their claim that they didn’t pay interest or demand interest, they did demand it—after a great deal of back-and-forth, they finally agreed to sign a heter iska. So anyone who is charged interest by a health fund today because they paid late can rest assured that they may pay it, because the funds have arranged a heter iska. But not everyone has one. And when a person buys an apartment from a developer, he needs to check whether there’s a heter iska. If not, he needs to

1:38:56 Speaker 2 adapt the contract in accordance with a heter iska. With rentals, too, the contract sometimes says—indeed, it always says—that if you don’t pay on time, there’s additional interest. Perhaps that can be changed? There is wording that makes it not interest but a penalty that doesn’t keep increasing, a one-time penalty or something else. With Hashem’s help, we’ll discuss that issue. Or you can write into the rental agreement between you and the other party, the landlord and the tenant, that it is subject to a heter iska document. Even if you don’t have a heter iska document of your own, you can write that it is subject to the heter iska document of this beis din or that beis din. And it would seem that even simply adding “subject to a heter iska” to the contract already protects you from the prohibition against interest. May we merit to observe the prohibition against interest and all the laws of the Torah. We’ll study this subject again and learn how to deal with the difficulties surrounding the prohibition against interest. But there’s a solution for everything. Baruch Hashem, as we said at the beginning, today’s economy and the way payments and credit work have all changed, and this raises many, many questions about the prohibition against interest. On the other hand, everything has its solution—a heter iska and the like. We need to know how to word things and how to do things so that we don’t stumble into violating the prohibition against interest. In the merit of observing these halachos, may we merit the true and complete Geulah immediately.