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Ruling: We will start with a look at the halachic workings of a heter iska. The ostensible lender (the noten) gives money to the ostensible borrower (the mitasek) in a manner that half of the money is a loan and half is given for the mitasek to invest on behalf of the noten and thereby make profits for the noten, to justify his receiving what would have been interest. Thus, the envisioned interest rate comes from only half of the money. If the mitasek claims that the investment actually lost money, he must provide witnesses, and if he claims lower than expected profit, he must swear that this is the case. If he fails to do either, he must pay the d’mei hitpashrut, i.e., the expected interest.
In this case, it is doubtful that the heter iska can justify the rates put forward in this document. First, due to the high rate of interest, it is doubtful that the agreement was made with serious intent to be based on the mechanism of a heter iska (Chut Hashani, Ribbit 18:2). Second, for a heter iska to work, there must be a possibility that the investment half of the money can realize the level of profit of the d’mei hitpashrut (Minchat Shlomo I:27; Igrot Moshe, Yoreh Deah III:41). In previous rulings in our beit din network, we cited the minhag of several batei din to disallow d’mei hitpashrut of more than 15% annually. According to Israeli law, as well, it is forbidden for an individual to lend money at 15% higher than the level of interest of the Bank of Israel, and the courts can adjust the rate downward. We have ruled that we accept this law according to Halacha. Finally, there is logic to claim that since the loan document states that the loan was taken to finance a Tama 38 project, if that project was known to not have borne profits, then it is possible that the interest is not due (interest might be possible because of a clause that the mitasek can use the funds for any profitable investment he chooses).
In this case, the 18% annual interest was valid based on the law and Halacha, but with the additional punitive interest, it becomes forbidden according to the law and Halacha.
P'ninat Mishpat (834)
Beit Din Eretz Hemda - Gazit
679 - Appeal of an Incomplete Ruling
680 - Limits of Interest Rate for Loan with Heter Iska – part I
681 - Limits of Interest Rate for Loan with Heter Iska – part II
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Beit Din Eretz Hemda - Gazit
P'ninat Mishpat Limits of Interest Rate for Loan with Heter Iska – part I
based on ruling 80033 of the Eretz Hemdah-Gazit Rabbinical Courts
Igrot Hare’aya Raffle of Property in Eretz Yisrael for Tzedaka
Igrot Hare’aya – Letters of Rav Kook: – #220
P'ninat Mishpat Who Breached the Contract? – part IV
Based on ruling 81087 of the Eretz Hemdah-Gazit Rabbinical Courts
P'ninat Mishpat P'NINAT MISHPAT: A Mess of Loans, Repayments and Grievances – part II
based on ruling 83033 of the Eretz Hemdah-Gazit Rabbinical Courts
P'ninat Mishpat P'ninat Mishpat: Realtor’s Fee on Large Commercial Building – part I
(based on ruling 85031 of the Eretz Hemdah-Gazit Rabbinical Courts)
P'ninat Mishpat P'ninat Mishpat: Multiple Agreements and Parties – part II
based on ruling 80082 of the Eretz Hemdah-Gazit Rabbinical Courts
P'ninat Mishpat P'ninat Mishpat: Dividing Parents’ Resources when Mother Still Alive
based on ruling 82017 of the Eretz Hemdah-Gazit Rabbinical Courts
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Hosha'ana Rabba FLYDUBAI & HOSHANA RABBA- ANI VAHU HOSHIA NA- I & HIM SAVE US
"Ani vaHu Hoshia Na", "I and Him, Save Us". We don't just pray to Him, but we also pray to and for ourselves that we should emulate and educate our children to have that instinctive altruism with which He created the world. President Trump seemed amused about Yaniv Hayon, our PLUMBER who confidently worked with G-d like Superman (he learned from a pilot on a TV show!) to save 174 lives on the Dubai hijacking, but we in Israel are totally accustomed already 78 years to our plumbers, teachers, garbage-men, rabbis, farmers & doctors being Hashem's shlichim! This is what Zionism is about.
Moreshet Shaul Hashem Is your Shadow – part I
Based on Siach Shaul, Pirkei Machshava V’Hadracha p. 420 – an address from 1941
P'ninat Mishpat A Non-Contractor in Changing Times – part I
(based on ruling 85128 of the Eretz Hemdah-Gazit Rabbinical Courts)
Moreshet Shaul Our King on Rosh Hashana, Our Father on Yom Kippur.
Based on Aroch Siach, p. 221 (Rav Shaul Yisraeli)
