Beit Midrash

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A Question of Interest


Various Rabbis

Case: The defendant (=def) gave money to the plaintiff (=pl) to use for his financial dealings. A written document spelled out how the profits from the investment would be divided, as pl was in the practice of doing. At a later occasion, def gave pl another sum of money, without a written agreement but with the understanding that he would give 30,000 shekels profit. Pl returned the principal of the second investment along with the additional 30,000 shekels. However, now he claims that the money was given as a loan, not an investment and since they did not use a heter iska, the added money was a Torah-level violation of ribbit, upon which the halacha is that the lender must return the money to the borrower. Def claims that the money was given as an investment, whose profits were not guaranteed, in which case there is no prohibition of ribbit.

Ruling:The halacha that ribbit that was paid returns to the debtor applies only in regard to a loan for which interest was set from the time of the loan (Shulchan Aruch, Yoreh Deah 161). While pl says this was the case, his claim is very surprising. Pl himself provided a letter of reference from a leading rabbi, who attests that pl is very careful not to compromise halacha and ethics in business and that he asks all sorts of business-related halachic questions to rabbis. How, then, can pl say that he violated a clear Torah law of agreeing to outright usury without bothering to use a heter iska? It is more likely that the deal, like most similar deals that pl was involved in, was an investment, not a loan.
The Shulchan Aruch and Rama (YD 168:25) say that if there is a disagreement between a borrower and lender over whether the borrower gave ribbit that needs to be returned or whether he did not give any or gave it in a manner that is permitted, the lender is believed without the need for an oath. There is a machloket if the exemption from an oath is only when the lender says he did it in a permitted way or even when he totally denies receiving interest (see Beit Yosef, ad loc.). In this case, though, there is no question that def received more money than he gave. The question is just whether it was done in a permitted manner, and there should be no need for an oath. In our case, def’s position is supported by the fact that pl usually deals in investments rather than loans and that their previous deal was of that nature.
There is also another possibility that supports def. Their deal was done in a very unorganized manner, with a lot of trust (until their relationship soured). Thus, even if the money was given as a loan, there is no certainty that a specific promise of actual profit was made.
For all of the above reasons, def does not have to return any of the money pl gave him in what appears to be an investment deal.
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