The Laws Governing the Prohibition Against Taking Interest and the Laws Governing Iska (41-80)

The Laws Governing the Prohibition Against Taking Interest and the Laws Governing Iska (41-80)

[The stringency in the previous subsection] applies when [the borrower/manager] stipulates [that he will give the lender/investor] a specific amount, whether he profits exceedingly or he does not profit at all, and only the responsibility for loss from the principal is [the lender/investor’s]. However, [such an arrangement] is permitted [if the borrower/manager] stipulates [that he will only give the lender/investor this] specific amount if [the investment] profits exceedingly or [at least profits to the extent] equal to the amount that [the borrower/manager] promised [the lender/investor. If it does,] he will give [the lender/investor] that entire [amount that he promised him]. If [however the investment] does not profit, [the borrower/manager] will not give [lender/investor] anything. Similarly, if [the iska] profits less than the set amount, he will give [the profit earned to the lender/investor, but] he will not pay [the remainder of the set amount] from his own resources. [This leniency applies] even if the recipient/borrower/manager is responsible for the entire amount with regard to theft and loss, as is the law, for he is a paid watchman.137 [It is permitted for the recipient, [i.e., the borrower/manager, to accept] the responsibility even for the depreciation in price and loss via forces beyond his control for half the money – i.e., [the portion] that is a loan.

([The rationale for the leniency in these instances] is that [even though the borrower/manager] stipulated a specific amount that he would give [the lender/investor,] since he will not pay [the lender/investor] from his own resources if he does not profit at all, [the arrangement] does not appear to be a loan with interest. Instead, [it is considered] that [by guaranteeing the lender/investor up to a specific amount of profit,] the recipient is selling his half of the profit [up
to the guaranteed amount] to the [lender/investor] in return for [the lender/investor] waiving the right to any profit above the specified amount, should there, in fact, be such a profit.

Such a sale – in which the recipient, [i.e., the borrower/manager,] sells his portion [of the profit] to [the lender/investor –] does not resemble a loan with interest. [In contrast, when the lender/investor] sells his portion [of the profit] to the recipient for a known, specific [return on his investment] that [the recipient/borrower/manager] will give him [regardless of whether or not this amount of profit is earned], it is considered similar to giving a loan with interest.)

(There are authorities who differ with the above and are concerned regarding [the possibility of transgressing] the prohibition against [charging and paying] interest in a complete sense, as forbidden by Scriptural Law, applying whenever [the borrower/manager] stipulates a specific amount [to be paid to the investor/lender] even when half the profit [from the investment] will not amount to that sum. However, the widespread custom in these regions is to rule leniently in this matter and to make [arrangements] using mamronos, i.e., legal contracts based on similar arrangements.138 [However,] this applies only [when the arrangement includes the proviso] that the responsibility for loss due to factors beyond control and loss due to the depreciation of [the value of] the merchandise must be shared by both parties equally, as explained above.)139

Nevertheless, care must be taken [when drawing up such a] document not to mention a rate of profit per week or per month that [the borrower/manager] obligates himself to pay for that time – for the reason to be explained140 – even though if there is no profit, the [investor/lender] will not receive anything [extra], and [the money] that he takes will be [deducted from] the principal.

The same applies regarding all the permitted means of receiving profit [from an investment] that will be explained. Care must be taken not to mention [a time span] for [payment of] profit, [e.g., such as an amount will be paid per] week or per month. ([The above applies] when the recipient/[borrower] accepts an obligation141 on himself, whether in writing or orally. However, if [the recipient/borrower/manager] desires [to make such payments] on his own initiative to reduce [the size of the principal], it is permitted [for the investor/lender] to accept [this money] from him. It is even forbidden to stipulate a specific amount [for the borrower/manager] to pay per year, because, with regard to interest, there is no difference between short-term [interest] and long-term [interest].) Instead, [the borrower/manager] should simply write that he will give such-and-such an amount at the end of the year or [after] half a year. When that time comes, [the two parties] should write another document.142 Alternatively, [the two parties may make such an agreement] even without a document at all if there was mutual consent that the investment will remain under the auspices of [the borrower/manager] for a year or half a year [under terms] similar to the [iska arrangement that applied during the] first period.
[In such an instance,] at the end of the second period, [the investor/lender] is permitted to receive the same amount of profit as he did during the first period. [Indeed, he may continue the arrangement] for an even longer time. Moreover, even if [the investor/lender] did not discuss [extending the agreement] with [the borrower/manager] at all at the end of the first period it can be assumed that [the borrower/manager] maintained possession of the funds according to the terms of the first iska arrangement.

(If [the borrower/manager] maintained possession of the funds for less than the time originally stipulated and [the lender/investor] comes to take [the money or merchandise] from his possession, they should not calculate the profit explicitly according to the weeks and months. Instead, [the borrower/manager] should143 simply pay [the lender/investor] based on the [amount of] time that had elapsed that year.)

All the above applies when the money that [the borrower/manager] receives is [the money that he uses for] the iska arrangement, [i.e.,] he uses the money to earn a profit and he does not use it [to pay] for his own expenses. However, if [the borrower/manager] spends more than half the money – [i.e., more than the half] that is a loan – for his own personal expenses in a manner that will not lead to a profit, for example, [he uses it for] his sustenance, his lodging, or to repay a debt, whether he did so with the knowledge of [the lender/investor] who consented that he use it [in this manner] or without his knowledge, even if he immediately returned other funds to replace them, and then did business with those other funds, the profit is [solely] his own. If he gives [some of the profit] to the [lender/investor], it is considered interest in an absolute sense. [This law applies] even if [the borrower/manager] did not specify a precise amount [that he would pay the investor/lender], but [rather] gave him half the profits [earned] from all the money, whether [the profit is] large or small. [The rationale is that] immediately upon using [the money] for his own expenses, he became obligated [to repay] that money as a loan, and the half of the money that was considered as an entrusted object for which its owner would receive half the profits no longer remained.

What should [the borrower/manager] do if he needs to borrow money from the investment temporarily for his personal expenses? When he returns other money in place [of the funds he took], he should have it acquired by [the investor/lender] via another person [acting as his agent] who will lift it up144 on his behalf. [This is considered a valid transfer] because an acquisition can be made on behalf of a person without his being present.145 [It is permitted for the borrower/manager] to borrow [money in this fashion] provided [the lender/investor] gives him permission146 to do so temporarily.147 However, if he borrows [this money] without [the lender/investor’s] permission, returning [the money] – even via another person – is not effective. [It is not considered having been returned to the investor/lender] unless [the borrower/manager] returns it [to the lender/investor] directly.148 In addition, his actions violate a Scriptural prohibition, for he deviates from the intent of [the lender/investor] by borrowing his money without his permission.

If [the borrower/manager] has merchandise on hand that is worth the half [of the original funds] that were considered as an entrusted object, he may use those funds for his own expenses with the consent [of the lender/investor] and transfer ownership of the merchandise149 [he possesses] [to the lender/investor] based on its present value, and not based on the purchase price he paid [if] it was less expensive [then], as mentioned above.150 [The borrower/manager may] give [the lender/investor his share of the profit] derived from [this merchandise], be it large or small. Alternatively, [the borrower/manager may] establish a fixed amount as [the lender/investor’s share of] the profits, and [give it to the lender/investor if] the profit from the merchandise amounted to this amount [or more], according to the custom explained above.151

[In such an instance,] it is not necessary [for the borrower/manager] to transfer ownership of the merchandise through a kinyan sudar.152 Instead, transferring the money itself [from the lender/investor to the borrower/manager initially] is sufficient, for the Sages established [that act] as a fully binding kinyan [for the transfer of property when seeking] to avoid the Rabbinic prohibition against [taking] interest in situations involving commercial activity, as explained above.153

The same law applies if [the lender/investor] does not give [the borrower/manager] any money at all at the present time, but [the borrower/manager] owes him money from a prior [debt]. It is not necessary for [the borrower/manager] to transfer ownership of [the merchandise] to [the lender/investor] via a kinyan sudar, provided he currently possesses all [the merchandise], as explained above.154 However, [the borrower/manager] must use [the merchandise] to make a profit; [he may] not use it or its proceeds for his personal expenses.

[The leniency allowing the borrower/manager to use a portion of the funds for his own private purposes does not apply] when he does not possess an amount of merchandise equivalent to the value of half [the sum stipulated in the iska arrangement, i.e., the amount] considered as an entrusted object. [In such an instance, the borrower/manager must use] the money [he received from the lender/investor] to purchase the merchandise. Alternatively, [if the borrower/manager needs to use the money for his own expenses] and [the lender/investor] gives him permission to borrow these funds temporarily, [the borrower/manager] must [halachicly] transfer other funds to [the lender/investor] via another person155 and then use that money to purchase [merchandise for the investment]. If [the borrower/manager] does not give [the lender/investor other funds] via a third party, the profit [the borrower/investor later] gives him is considered interest in a full sense, [as forbidden by] Scriptural Law.

[The rationale for this stringency is that] since [the lender/investor] gave money to [the borrower/manager] and arranged [that the borrower/manager pay him] half the profits, and also gave him permission to use the money for his personal expenses, when [the borrower/manager] uses the money for his personal expenses, all the money will be considered a loan [rather than an investment]. Thus, the half of the profit that [the borrower/manager agreed] to give [the lender/investor] will be profit resulting solely from a loan.

Therefore, even if [the lender/investor] accepts full responsibility – even for theft and loss – for the entire sum of money and all the merchandise, [i.e.,] even for the half [of the funds considered] a loan, [the arrangement] is forbidden. [The rationale is that the lender/investor’s] acceptance of responsibility is not effective and does not bring about the release of the Scriptural [prohibition against] interest. By contrast, when [the lender/investor] does not give [the borrower/manager] permission to use [the money] for his personal expenses and [indeed the borrower/manager] does not use it for his personal expenses, but rather invests that money for profit, [a share of] the profit rightfully belongs to [the lender/investor]. In such an instance, [the lender/investor’s] acceptance of full responsibility [for any loss, including loss and theft] is effective to permit the establishment of a fixed amount [of payment], even if there will not be any profit at all, as explained above.156

[The rationale is that] the establishment of a fixed amount [of payment] is not forbidden according to Scriptural Law, because [the borrower/manager] is acquiring the extra profit [that would normally accrue to the lender/investor] above the initial fixed amount [for a specific pre-agreed sum]. Nevertheless, since [such an arrangement] resembles a loan with interest, the Sages forbade [such arrangements. However,] when the full responsibility [for any loss] is borne by [the lender/investor, the transaction] does not resemble a loan at all, as explained above.156

[When a person] desires to invest his money in an iska arrangement [in which he receives] half the profits, but his principal will be [entirely] secure with all the responsibility [for loss being borne by the borrower/manager, the arrangement is forbidden. This applies even if the lender/investor] will add to the wage [paid to the borrower/manager] for his efforts – and even if he will give [the borrower/manager] a large gift for accepting more responsibility than is required by law, in the manner explained above.157 [The rationale is that] whenever [a person] invests [money] in [an arrangement ] where he is very likely to profit and very unlikely to lose, [his] entire [investment] is considered a loan and it is forbidden according to Rabbinic Law, as explained above.158

[That being so,] what should he do [to ensure that he will not lose any of his investment]? He should stipulate that [the borrower/manager] only purchase a specific type of merchandise, and if [the borrower/manager] deviates [from these instructions], he will bear responsibility for the entire [investment], even for the half that is [considered] an entrusted object, and even for losses due to forces beyond his control or the depreciation [of the merchandise’s] value. [With this stipulation,] if a profit is made from the merchandise, it will be divided evenly [by the investor/ lender and the borrower/manager. Such an arrangement is acceptable because] the law is that whenever an agent deviates from the instructions he was given, he is responsible for any loss, but the profit [belongs to] the person on whose behalf he was acting.159 [Even] initially, [the borrower/manager] is permitted to deviate [from the instructions he was given] for the benefit of [the lender/investor], and purchase other merchandise that will bring a greater profit. [In such an instance, since he deviated from the principal’s instructions,] the entire responsibility is his.

While it is true that [the lender/investor] also intended for [the borrower/manager] to deviate [from his instructions] and earn greater profits, and [thereby have the borrower/manager undertake] full responsibility [for any loss], still, this is not considered haaramas ribis [i.e., interest taken deviously. The rationale is that such an arrangement, where] the entire responsibility is [the borrower/manager’s] is only forbidden according to Rabbinic Law160 since [in such a situation, the lender/investor] is likely to profit and unlikely to lose. Although [in the case at hand], where [the borrower/manager] deviates [from the lender/investor’s instructions and accepts] full responsibility, [the lender/investor] is [also] likely to profit and unlikely to lose, nevertheless, [the borrower/manager made that choice willingly]. Were he not to have deviated from [the instructions], the full responsibility would have been shared equally and [the lender/investor] would have been as [equally] likely to gain or lose as [the borrower/manager. Hence,] the arrangement is permitted because [the borrower/manager] deviated on his own volition; he did not act as [the lender/investor’s] agent when doing so.

Similarly, [the lender/investor] may stipulate that [the borrower/manager] must bury the money [belonging to the partnership] underground [when it is not being used], and if [the borrower/manager] deviates [from this precondition] and [the money] is lost due to forces beyond his control, he is responsible for all the losses, even the half [that is designated as] an entrusted article.

Similarly, [the lender/investor] may stipulate that [the borrower/manager] lend [the money] to non-Jews at interest [and that he take] gold and silver [from them] as security [for the loan], and bury it in the ground, and that he [also bury] the money [given him to lend] before he lends it and after the debts were paid so that [it] will be secure, without [a possibility of] loss. Should [the borrower/manager] deviate [from these instructions] and [use the money] to engage in commercial activity with merchandise, he will be responsible for any loss, whether due to forces beyond his control or to the depreciation [of the value of the merchandise. The borrower/manager may then use the money to] engage in such commercial activity and give [the lender/investor] half the profits, while the entire responsibility [for any loss] will be upon [the borrower/manager].

(All the above applies regarding loss that results from a deviation from [the instructions] that [the lender/investor] gave to [the borrower/manager]. However, the law requires that any loss that does not result from this deviation must be shared equally by both [parties]. If the [the borrower/manager] accepts [responsibility for the entire loss, the transaction violates the prohibition against] interest, unless [the lender/investor] states explicitly that if [the borrower/manager] deviates [from the lender/investor’s instructions, the borrower/manager] will be responsible for the entire loss, including such losses that do not result from his deviation.)

There is another way that [the lender/investor can remain assured that] the principal will remain secure even though the full responsibility [for any loss] will be shared equally by both [parties. This involves the borrower/manager] agreeing that his word will not be accepted regarding a loss of the principal [even] if he takes an oath – as required by the laws [pertaining to watchmen. The rationale is as follows: The borrower/manager] is a paid watchman,161 who is liable to take an oath if [the entrusted article] was destroyed due to forces beyond his control. Instead [of taking that oath, the borrower/manager agrees that for his word to be accepted, he] must clarify through [the testimony of] two halachically-acceptable witnesses that he suffered a loss due to factors beyond his control. If [the borrower/manager] will not clarify the matter through [the testimony of two halachically-acceptable] witnesses, he will be liable to pay for the entire loss of the principal. Even though [in this manner, the lender/investor will be likely to profit and] unlikely to lose [because it is very unlikely that the borrower/manager will have witnesses that will be able to verify that the loss was due to factors beyond the borrower/manager’s control, the transaction] is permitted. Since [if there will be a loss to the investment and] it will be possible for [the borrower/manager] to clarify [the matter] through [the testimony of] witnesses, [it is possible that the lender/investor] will lose, not only profit.

However, it is forbidden to make such a condition regarding the profit [as well] – i.e., that [the borrower/manager’s word] would not be accepted [even] if he took an oath stating that there was no profit. [The rationale is that] since there is a doubt whether there will be profit from the outset, [the lender/investor] does not have the option of saying, “I do not believe your [statement that we did not profit as much as we expected].”

([Different rules apply regarding a loss of all or part of the principal.] Even if [the lender/investor] believes [the borrower/manager] in his heart – [that the loss was due to factors beyond his control] – that is not effective in [nullifying the guarantee]. Since he stipulated that if the situation is not clarified through [the testimony of] witnesses, [the borrower/manager] must pay [the full worth of the principal given him by the lender/investor], and [the borrower/manager] accepted this condition, [the transaction is binding. The rationale is that] all [mutually accepted] stipulations regarding financial matters are binding.162 In this instance, there is no question of interest involved, since, if [there will be a loss and] it will be possible for [the borrower/manager] to clarify [the situation] through [the testimony of] witnesses, [the lender/investor] will be as likely to lose as he is to profit.)

All of these possible ways to permit an iska arrangement apply in an instance in which [the borrower/manager] does not spend the money on his personal expenses,163 but rather engages in commercial activity with it [to earn a] profit.

There is another way that permits [the borrower/manager] to spend the money [he receives from the lender/investor] for his personal expenses, provided he owns merchandise equivalent to the entire value of the money [the lender/investor] gives him and he sells [that merchandise] to [the lender/investor] – whether for its value or for less than its value – for this amount of money.164 [The borrower/manager] must formalize the transaction with a kinyan sudar165 on the condition that if he does not give [the merchandise] to [the lender/investor] by a specific date, this kinyan sudar will obligate him [retroactively] from the present time to pay for it – even [to pay] up to double its value on the date specified. Similarly, [even] if [the borrower/manager] did not own such merchandise, but its price was established in the city in a manner that permits [the lender/investor] to pay money for it [now], in advance and receive [the merchandise] afterwards at the present price, as explained above,166 [the lender/investor] may stipulate – and formalize [the agreement] with a kinyan sudar – that if [the borrower/manager] does not deliver [the merchandise] by a specific date, he will retroactively become liable from the present time to pay [the lender/investor] up to double the [present] value [of the merchandise] by a specific date. [The rationale is that] whenever paying for merchandise earlier is entirely permissible as described above, there is no interest involved in paying [the lender/investor] for it, even [when paying] up to double its value at a
specific date because [the borrower/manager] did not give [the merchandise] to [the lender/investor] at the time that was agreed upon. [The borrower/manager] is not paying [the lender/investor] to wait for repayment. Instead, [he] is [paying] a penalty that he accepted upon himself. As soon as the [agreed upon] time passed without him paying [the lender/investor], he became liable for the entire penalty at that moment. Thus, [this payment] does not resemble interest at all, for [interest] compounds and increases over the time during which the owner awaits the payment [that is due, while in the case at hand, the entire penalty becomes due at one time].167

Even if [the lender/investor] told [the borrower/manager] to pay the penalty at a far later date, he is [merely] extending the time given [the borrower/manager] to pay the penalty, but the obligation [to pay the penalty] was incurred at the moment [he did not deliver] the merchandise at the agreed upon time. [Indeed,] even if the seller desires to give [the lender/investor] the merchandise or return his money [just after failing to meet his commitment, the seller] is not freed of his obligation to pay the penalty.

Since this payment is a penalty, there is no concern that [the borrower/manager] pays [the lender/investor] money [and not merchandise. True,] in other instances when [the purchaser] gives [the seller] money for merchandise beforehand and he does not give him the merchandise later, it is forbidden [for the seller] to pay [the purchaser] money for the merchandise, as explained above.168 [Nevertheless,] in this instance, it is permitted, [because this payment] is [categorized as] a penalty.

)[There is a difficulty with the above arrangement] according to the authorities who maintain that every penalty is an asmachta even if [the agreement] was formalized by a kinyan sudar.169 [According to their view,] the only exception is when [the agreement] was formalized by a kinyan in a prestigious court.170 As stated in Choshen Mishpat, sec. 207,171 this view is given primacy.172 [For this reason,] in this instance as well, the agreement must be formalized by a kinyan in a prestigious court. Alternatively, it may be stated in the document [delineating the transaction] that the agreement was formalized by a kinyan in a prestigious court. [Such a statement] is effective even though [in fact] a court was not present there at all, [provided] the agreement was actually formalized with a kinyan sudar, as stated in the above source.171 [The rationale is that merely stating that the agreement was formalized in a prestigious court demonstrates that both parties are aware of the seriousness of their actions.] People at large must be cautioned regarding this matter, because [many] err in this regard and do not formalize [such agreements] with a kinyan sudar at all. Thus, they expropriate payment with [such] documents in a manner contrary to [Torah] Law.)

[There is] a practice that is followed in some places to compose legal documents based on the principle referred to as heter kessef, “a license because of silver.” The license is [based on the following provisions:] The borrower sells [the lender] pure silver [bullion]173 at a price far below its [present market] value [on the condition that] he deliver it to [the lender] immediately, on that day. If [the borrower] does not [immediately] deliver [the silver bullion] to [the lender], he obligates himself to pay [the lender] a specific amount by a specific date. [The amount owed is set] according to the profit margin agreed upon [by the borrower/seller and the lender/purchaser, and is paid] as a penalty [for not delivering the silver bullion on that day]. The borrower acknowledges that he has all the silver in his possession at this time. In this way, it would be permitted for him to sell it [to the lender/seller] for less than its value so that [the lender/seller may] give him the money before [he delivers the silver. It is necessary for the borrower/seller to make such an acknowledgement] because if he does not possess all the silver [he will owe], it is forbidden for the lender to give him the money even one moment before [the borrower] gives him the silver that he is selling to [the lender] at less than its value, as explained above.174

This is not a desirable custom because a false statement is not effective at all, as explained in that source.174 While it is true that [false statements] are effective with regard to monetary law,175 [so that] if a person acknowledges that the money in his home belongs to another person, that person acquires the money by virtue of this acknowledgment,176 even though it is known that [the money] does not belong to that person. Nevertheless, a false acknowledgment is not at all effective in releasing the prohibition [against taking interest].

(Needless to say, [the arrangement is not effective] if the borrower [i.e., the person selling the silver] is not aware of the heter kessef written in the promissory note [formalizing the arrangement].177 True, with regard to monetary law, when a borrower signs a promissory note, he is obligated in all [the responsibilities] stated within it even though
he does not know anything [about the obligations written in the document he signed]. Nevertheless, it is only possible to release the prohibition against interest through a penalty [incurred by failing to maintain one’s agreement with regard to] a commercial transaction.178 [In the instance at hand, the borrower] did not intend to sell anything at all, but [rather] to borrow money via a straightforward loan. How can the lender purchase [the silver] if the borrower is not selling it to him? Needless to say, [the arrangement is not valid] if the lender is not aware of the heter [kessef and] does not intend to purchase silver at all and receive a penalty [for it not being delivered], but [instead intends] to [give] a straightforward loan.179

How then can [the two parties arrange for a loan with a heter kessef arrangement if the borrower does not possess any silver at all? In such an instance,] the lender should make an explicit agreement with the borrower that he is giving [the borrower] money at the present time so that he will sell [the lender an amount of] pure silver [bullion] that he [must] deliver to [the lender] that day. The value of [the money given by the lender] must be equivalent to the value of the silver at the time [the borrower] delivers [the silver] that day, without reducing its price at all.180 There is no concern regarding a prohibition in such [an arrangement. This applies] even if there is no [set] market price for pure silver [bullion] at all in this city because it is not available for purchase there on a regular basis. [The leniency] even [applies] when the borrower does not own any silver [bullion] at all. Nevertheless, [the recipient/borrower/seller] may take money beforehand and obligate himself to [deliver] silver [equivalent to that monetary value] on the present day since he is not reducing the price [of the silver] at all because [the investor/lender] is paying him the money earlier [that day]. The lender should formalize [the agreement] with [the borrower/agent] via a kinyan sudar, [clearly stating] that if [the borrower/agent] does not give him all the silver that day, he is liable to pay a specific amount – [i.e.] the principal and a profit that [the borrower and the lender] agree on – at a specific time [i.e., at a specified future date].

If [the lender] desires to extend the loan for several years, he should further stipulate with the [the borrower] that if he does not pay [the lender] the entire sum he owes him at this [specific] time, the borrower is obligated to give [the lender an amount of] pure silver [bullion equivalent in value to the sum owed] on that day, according to the price [of silver] at the time of delivery. If [the borrower] will not give [the lender] the [amount of] silver [bullion] equivalent in value to the sum he still owes [the lender] on that day, [the borrower] is obligated from the present time – [by the agreement] formalized with a kinyan sudar – to pay such-and-such an amount – [which is equal to] the sum of the principal and the profit that [the borrower and the lender currently] agree on – at such-and-such a time, [i.e.,] at the end of a [given] year.

Similarly, such a stipulation may be made for many years. All these obligations must, however, be formalized with a kinyan sudar, stipulated explicitly, and written in the promissory note or another legal document. It must also be stated there that this agreement was confirmed via a kinyan in a prestigious court.)

There are authorities who differ [and do not accept] this license [where the extra payment is classified as] a penalty, stating that [such an arrangement] is not effective if [the lender] sets the time when the money that is a penalty must be paid [for] after the merchandise [was agreed to] be given except [under the following conditions:]

The lender – who is [also] the purchaser – is not obligated to wait at all for the principal, i.e., the money [originally] given, after the time the merchandise was to be delivered passes, but instead, may demand [repayment] immediately after the time it should have been delivered. In that instance, although] the seller[/borrower] pays [the lender/purchaser] his money immediately, he will nevertheless not be absolved of the penalty that must be paid at the time set for him to pay it. Thus, the [lender/]purchaser does not receive any benefit at all for delaying [payment of] his money until the time of the payment of the penalty. If, however, [the borrower/seller] is obligated to postpone [requesting payment] of the principal until the time [set for] the payment of the penalty, for this was the reason [the borrower] accepted the obligation of the penalty, and if he does not delay [payment of] the principal until that time, he will be exempt from the penalty, [the arrangement involves] interest in a complete sense. [The rationale is that the lender] is receiving compensation for the delay of payment. True, he is receiving it as a penalty. [Nevertheless, the borrower/]seller would have been absolved [of the obligation to pay the penalty] if he did not delay [payment of] the principal. Every G‑d-fearing person should give weight to their words and conduct himself stringently regarding the severe prohibition against [taking or paying] interest, even though in some places they do rule leniently, [accepting the ruling of] the first opinion.

Nevertheless, if the arrangement is such that should the borrower/seller desire to pay [the lender/purchaser] the penalty and the principal before the due date for the payment, [the borrower/seller] would then not be obligated to pay the entire penalty and [the lender/]purchaser would be obligated to accept the payment from him, all authorities agree that [the arrangement] is forbidden. [The rationale is that] having [the obligation to repay] the principal extended [brings] the lender profit and causes the borrower a loss, for doing so increases the penalty. Thus, it involves interest in a complete sense.

The entire leniency [described above allowing additional money to be paid] as a penalty applies only when the penalty is for merchandise that [the seller] sold [the purchaser], but did not deliver on time. However, if the penalty comes as a result of debt [stemming from] a loan owed [to a lender that was not paid when it originally fell due, the above arrangement is forbidden. In such an instance – i.e., the borrower] accepted upon himself a penalty of such-and-such if he did not repay [the lender] his money by this-and-this date, and formalized his commitment with a kinyan sudar – [the penalty appears to be interest on a loan and therefore, such an arrangement is forbidden.]

Even if [the borrower] told [the lender], “I presently obligate myself to give you [a penalty of] such-and-such if I do not repay you on such-and-such date,” [the arrangement] is forbidden because [it is considered] haaramas ribis (interest taken deviously). [The rationale is that] since [the borrower] is paying [the lender] more than [the amount] he lent him, it appears that [the lender] is giving [the borrower] a loan with interest. This does not apply when [the borrower] pays [the lender] money for merchandise.

Similarly, when a debt was incurred because of a loan, if [the borrower] said that, as a penalty, he would repay [the lender] in merchandise [worth] more than the debt [owed] if he did not repay [the lender] on the [established] date of payment, [the arrangement] is permitted. [The rationale is that] since [the lender] lent [the borrower] money and receives merchandise [as repayment for the loan], the interest is not so apparent.

Nevertheless, there is an authority who forbids [giving] a loan when [the borrower] provides collateral that is worth more than the debt, and
tells [the lender upon receiving the loan,] “If I do not pay you by this-and-this date, you will acquire the collateral.” [According to this authority, this restriction applies] even if [the borrower agrees] to transfer ownership [of the collateral retroactively] as of the date [the loan was given if the loan is not repaid at the appointed time. The rationale is that] since [the borrower] provided [the lender with collateral worth] more than the debt at the actual time of the loan, it appears as though [the lender] is lending him at interest. It is desirable to give weight to [this authority’s] words. Nevertheless, it is permitted to make such statements at times other than the actual time the loan [was given].

If the collateral is a house or other real estate, it is permitted to make such statements even at the actual time the loan [is given].181 However, it is forbidden [for the lender] to stipulate that if [the borrower] seeks to sell the house, he is forbidden to sell it to anyone else other [than the lender] except [at a price equivalent to] the money [loaned], which is less than [the house’s actual] value. [The rationale is that] this is [considered] interest in a complete sense since [the borrower] is obligating himself to reduce the price [of the house for the lender] as payment for the loan.

[The above prohibition] does not apply when [the borrower] transfers ownership to [the lender,] from the present time [retroactively, if the owner fails to repay him on time], because then [the arrangement] is considered a sale. Furthermore, [initially, the borrower] is not compelled to reduce the price [of his home for the lender] as payment for the loan because he has the option of selling [the home] to another person and repaying [the debt] on time. Thus, [the lender] will not make a predetermined profit because of this loan.

The entire leniency [when additional money is paid] as a penalty applies only when the obligation for the entire penalty takes effect at one moment ‒ immediately after the time when payment of the money [the seller/borrower] owes [falls due]182 or immediately after the time when delivery of the merchandise [is required. Different laws, however, apply] if the obligation takes effect incrementally over the course of time. For example, [the purchaser/borrower] said, “If I do not pay you the debt [I owe] you at this-and-this time, I am obligated to pay you this-and-this much as a penalty every week or every month that I fail to pay you.” Even though [the arrangement] comes as a penalty, it is considered interest [forbidden] by Scriptural Law in a complete sense. [The rationale is that in this instance] the penalty progressively increases over the course of time that [the purchaser/borrower] delays [full repayment of] the money.

[The] same [principle applies] if one pays for merchandise before [it was delivered. If the seller tells the purchaser], “If I do not deliver the merchandise at the time specified for delivery, I am obligated to repay your money [together with] this-and-and this [amount] as a penalty (– or even without a penalty). As long as I do not pay you, I am obligated to pay you this-and-this amount as a penalty every week or every month.” [Such an arrangement] is considered interest [forbidden] by Scriptural Law in a complete sense. [The rationale is that] immediately after the time the merchandise was due to be delivered, the money [the purchaser paid for the merchandise] is considered a debt incumbent on [the seller], and interest for any debt is prohibited by Scriptural Law in a complete sense, just as a debt that originated as a loan [is prohibited by Scriptural Law,] as explained above.183

[The arrangement is forbidden] even if [the seller] told [the purchaser], “I am obligated to pay you on this-and-this date. If I do not pay you within a week after that date, as confirmed by a kinyan sudar, I obligate myself from the present time to pay this-and-this amount as a penalty, together with the principal immediately after that week. If I do not pay until after another week, I obligate myself to you with this kinyan sudar, from the present time, to pay this-and-this amount as [an additional] penalty together with the principal immediately after that week.” [Continuing this pattern, the seller] obligates himself [to pay an additional penalty] for every week [he fails to return the money]. Thus, the penalty for each week takes effect at one moment at the end of each week and [throughout] the entire week, [the purchaser] waits without [any additional] charge [to the seller. The motivating logic is that] for even if [the seller] repays him on the seventh day, he will not be penalized [an extra amount] for that week. [Despite all the above, such an arrangement] is not effective at all [in making it permissible.184 The rationale is that] since [the borrower] obligates himself to pay an [extra] fixed amount every week or month, that very fact demonstrates that [the payment] is interest in a full sense; [regarding it as] a penalty would only be a deception.

Similarly, regarding all permitted arrangements made for a loan, for example, an iska arrangement and the like, one must be careful not to mention any obligation for a fixed amount week by week or month by month in the document [recording the agreement], as
explained above.185 [The rationale is that] if [the document] stipulates [an obligation for] a fixed amount [to be paid] for [each] week or [each] month [that passes], it is evident that [the payment] is [payment of] interest in a complete sense, and any [arrangement mentioned that is assumed to be permitted] is only [an act of] deception. [Now,] every [arrangement that is assumed to be] permitted that is merely a deception is not at all effective according to Scriptural Law.186

[Such an arrangement] does not resemble [one in which the seller/borrower] obligates himself to pay a [one-time] penalty if he does not repay [the amount due] by a specific date, [in which instance, the payment] is forbidden as interest taken deviously only according to Rabbinic Law,187 but is not forbidden according to Scriptural Law. [In that case, since the interest is only forbidden according to Rabbinic Law,] if [the borrower] pays [the lender] money for merchandise or [gives him merchandise for money, the arrangement] is permitted entirely.188 [The rationale is that, in that instance,] the penalty does not increase over the course of weeks or months. Instead, the obligation falls at one time. Thus, there is no [clear] proof to say that it is not truly a penalty. It is only that the Sages forbade [such an arrangement] when [the borrower] repays money for money and gives [the lender] an extra [amount,] because it appears comparable to interest taken deviously.

Similarly, [our Sages forbade the following arrangement:] One person tells another person, “Lend me a maneh.”189 [That person] replies, “I do not have a maneh, [however,] I do have wheat worth a maneh [that I am willing to lend you].” He then gives [the person who wanted to borrow the money a loan of] wheat worth a maneh190 based on the [current] market price. Afterwards, [the lender] purchases that same wheat from [the borrower] for less than a maneh, [which was the value of the wheat when] he lent it to [the borrower]. Whether he purchases [the wheat] from [the borrower] immediately or [at a] later [date], as long as the market price for [that amount of] wheat was still a maneh,191 it is forbidden [for the borrower] to pay his debt for the wheat with money [instead of with wheat], because this is considered interest taken deviously.190 [The rationale is that] since afterwards [the borrower] sold [the lender] that [same] wheat192 and received less than a maneh from him, if [the borrower] pays [the lender] a maneh [for the wheat he borrowed],193 it appears to be interest taken deviously, since initially, [the borrower] did not ask [the lender] to lend him wheat ‒ [rather, the borrower asked for a loan of] money. However, if initially, he asked to borrow wheat or if [the borrower] does not pay [the lender] with money, but rather with wheat or with other produce, [the arrangement] is permitted,190 provided the lender did not stipulate with [the borrower] at the time he lent [the borrower] the wheat that he would sell it back to him for less than its value. However, if [the lender] did so stipulate, [the profit he makes] is considered a form of interest in a complete sense, and when [the borrower] returns the wheat to [the lender], it is forbidden for him to repay [the lender with] more [wheat] than he received from him under any circumstances.

There is a straightforward way for every G‑d-fearing person to avoid [the prohibition of] interest according to all authorities and [still] receive a fixed profit from his money year-by-year, or month-by-month, while his principal remains secure. [The investor] should give [a sum of money] to a person who owns a house or a store, not as a loan backed by security, but as payment of rent [in advance], i.e., [the person providing the money] should rent [the other’s] house for twenty years or more, each year for a minimal amount, [and then, rent out the house or the store to another person at its true market value].194

Although the [use of the house or store] is worth a lot [more than the amount the renter is paying, and the owner] is accepting a lesser amount because [the renter] is paying him the money for the rental immediately [rather than over the course of time], this is permitted, as explained above.195 [The investor/lender] should give [the owner] the money as the payment of rent for twenty years or more, based on the value of the money he gives [the owner of the property] and the profit he desires to gain from [the investment/loan]. For example, if [the owner/borrower would like to borrow twenty gold dinarim. Therefore, the investor/lender] gave [the owner/borrower] twenty gold dinarim [as a fee for renting the property for twenty years, when the going rate for] the rental of [such a] house for one year was five gold dinarim. [In such an instance,] the [investor/lender] should rent [the house] for twenty years for one dinar per year, and then rent it out to another person for five dinarim [per year], taking the rental fee for himself, year-by-year or month by month. If the owner of the house would want to return the dinarim [he borrowed] after a year or two, he should deduct one or two dinarim [from the twenty dinarim], as payment for the rental [of the home during] those previous years. He should pay [the renter/lender] the remainder [of the sum he borrowed] and [he may then] return to his home. Similarly, if the house collapses or is consumed by fire, [the owner/borrower] must return the money to [the renter/lender] after deducting a dinar per year for the previous years. [The rationale is that] the entire responsibility for losses beyond [one’s] control is not the renter’s but the owner’s.

Should the owner desire to remain in his home and pay the rent himself, [he can do so in the following manner:196] He should ask one of his friends to rent the home for him from the [original] renter[/lender], and then rent it out to the owner. The owner will then pay the rent to his friend, who will, in turn, pay the rent to the [original] renter[/lender.194 This must be done in this manner,] for should the [original] renter himself rent out the house to the owner[/borrower], it would appear that [the original renter/lender] is taking interest deviously, as a return for the money that he gave [the owner] as a loan and not as payment for rent, since [the renter] is renting [the home] back to [the owner/borrower]. This is not the case when [the renter/lender] rents [the property] out to someone else. It is then obvious that [the transaction] is an actual rental [agreement] and not a loan. [The above is permitted,] provided that the [original] renter first makes a formal acquisition of the home, doing so by means of one of the manners by which real estate is acquired when it is rented.197 [The renter/lender must do this] prior to his renting [the property] out to someone else, since [otherwise,] up until the time of formal acquisition, the ownership [of the home] is retained by the owner, and the money [he receives for the home] is a loan.

All the above applies when the person who supplied the funds cannot compel the owner of the home to redeem his home [and regain the full rights of ownership] until the end of the time for which [the renter/lender] rented it, at which time, [the owner/borrower] will return to his home without any charge.198 Thus, there is no loan involved at all, for the owner of the home is not obligated to return any money at all to [the person who supplied the funds] unless he willingly desires to redeem his home [before the end of the lease]. However, if [the person who supplied the funds] stipulates that he can compel [the owner] to redeem his home at the end of the year or at the end of several years, deduct from the money [of the rental] for the years that passed, and return the remainder, [the money] is [classified as] a loan in a complete sense.

[Therefore, such a loan] involves interest, because the money [the property owner] deducts as a rental [fee] is less than [the rental value of the property. The general rule is] that any person who lends money to another is forbidden to rent anything from [the borrower] for less than its value, because that is considered interest.199

Even if a person lends money to someone, taking his home as security200 [for the loan], and the lender himself lives [in that home], he must deduct the full amount of the [year’s] rent based on its [market] value. [The owner/borrower] is not allowed to reduce the rental fee at all unless [he stipulates] that if the house collapses or is consumed by fire, the lender will bear the loss in return for the amount [which the borrower/owner] would deduct from the loan for the entire year. [In such an instance,] even if [the lender] dwells in [the home] for only one day, and [according to the rental agreement,] the borrower does not need to give him another house in which to dwell until the end of the year, [the arrangement is permitted. The rationale is that] the lender is putting himself in a position where there is a possibility of loss by obligating himself to deduct a fixed amount [from the sum owed] for the [entire] year, for perhaps he will dwell in the house only for a short amount of time and the rental will not [even] be worth [the reduced amount he pays]. Therefore, it is not clear that the lender[/renter] will profit. [Accordingly, the Sages] were not concerned about interest [in a situation] where a person offers his house as security [for a loan] since it is somewhat similar to a sale.201

By contrast, when a person lends money to another [without making any stipulations], it is forbidden for [the lender] to rent [the borrower’s] home or anything else for less than its [current market] value under any circumstances.202 The same applies to someone who provides collateral, but is not providing it as collateral for money being given [presently] as a loan, but [rather] collateral for a preexisting loan [that has yet to be repaid]. This does not resemble a sale at all
because [the person giving the security] is not receiving money for the object he is presently giving.

There are authorities who maintain that even one who gives his home or the like as collateral to one who lends him money is forbidden to rent [the home] to [the lender] for less than its [market] value, unless he does not have the option of redeeming it during the duration of the loan against the will of the lender[/renter. In that instance, the arrangement] is considered a sale during the time that [the borrower] does not have the option of [redeeming the property] against [the lender’s] will. Weight should be given to their words and [the lender/renter should] stipulate that the borrower cannot redeem [the property] against the will [of the lender]. With this stipulation, [the arrangement] is permitted even though [the lender/renter] may compel the borrower[/landlord] to redeem [the property] whenever he desires. There are [authorities] who rule stringently even in such a situation.203 However, it has already become widespread custom to rule leniently because [the matter concerns a Rabbinic prohibition, and] in questions of Rabbinic Law, the more lenient opinion should be followed.204

There is no difference whether the collateral offered was a home, other real estate, or movable property. In all instances, it has become customary to permit [an advance of money to be repaid] by deducting a minimal amount per year [as a rental fee. This is permitted] even though [the value of] movable property may depreciate significantly through use. For example, one [may] advance money and [take] holy texts as collateral [with permission] to study them, [while] deducting a small amount [that was agreed upon from the debt] each year.205 Nevertheless, [the arrangement must include the proviso that] if the collateral was destroyed by factors beyond one’s control, the lender will suffer a loss – [i.e.,] he obligates himself to grant the borrower a deduction [in the amount owed] for the entire year even if he only used [the collateral] for one day [that year] and the borrower would not be obligated to provide [the lender] with other collateral for him to use until the end of the year, as explained [at the beginning of this subsection].

However, it is not necessary for [the lender] to suffer the loss of the [entire] principal that he lent [the borrower, i.e.,] to forfeit his debt because of the loss of the collateral due to the forces beyond his control. Instead, [his situation] will be the same as that of any other lender who receives collateral and nevertheless does not forfeit his debt because of the loss of [the collateral] due to forces beyond his control.

All of the above applies when the lender himself uses the collateral or rents it out to another person. However, if the borrower uses the collateral or lives in his home [that was given as security] and pays rent – even to another person who rented the property from the lender – [the arrangement] is forbidden under all circumstances because [it is considered] interest taken deviously. [The rationale is that] it appears that [the lender] is using deception to receive a profit from the loan that he gave [the borrower] by using an intermediary who takes the rent from the borrower and gives it to the lender. [For our Sages] permitted [payment] via an intermediary [for permission to use the collateral206 [the borrower provided the lender] only when the lender can never compel207 the borrower to redeem his collateral with money, but instead if the borrower desires, he can leave the collateral in the possession of the lender, deducting [a set amount each year or month] until he has deducted the entire sum of money that [the lender] loaned him. In that instance, [the arrangement] is not a loan at all since [the lender] will never have his money returned against the will of the borrower. Rather, [the arrangement] is a rental [agreement. The renter/lender] is renting [the collateral] at a low price because he paid [the rental fee] in advance, as explained above.208

Although the borrower may redeem the collateral during the term [of the arrangement] against the will of the lender, the classification [of this arrangement] as a “rental” [remains true] throughout the [entire] time that [the borrower] has not redeemed it. [The rationale is that] the lender pays a rental fee for the time that passed by deducting an amount from [the borrower’s] debt.

To what does the above209 apply? To a rental [agreement]. However, [different rules apply to] a sale. If the seller stipulates with the purchaser that [the seller] can redeem the property he sold when he has the money,210 after a specific time, or until a specific time,211 [the arrangement] is not a sale in a complete sense. Instead, the money is [considered] a loan from the standpoint of the purchaser.212 [The purchaser] is [therefore] forbidden to use [the property] he purchased or rent it out during the entire time that the seller does not redeem [the property] because [doing so] would constitute interest213 in a complete sense.

[The above applies] when the purchaser[/lender] accepted this stipulation as a completely binding obligation allowing the seller[/borrower] to call him to court and compel him to return the property he purchased. However, if the purchaser[/lender] did not accept this stipulation as a [completely] binding obligation – although he promised [the seller/borrower] that he would willingly return [the collateral to the seller/borrower if he desired to redeem it], but that [the seller/borrower] could not call him to court and compel him to redeem it, the stipulation is not binding to the extent that it can nullify the sale. [Therefore, the agreement] is not considered [a loan with] interest.

There are authorities who [do not accept the last point. They] maintain that [the restriction stated at the beginning of this subsection applies] whenever it is obvious from the attitude of the seller[/borrower] that he desires to [eventually] negate the sale and return to [the property] he sold, and it is with this intent that he made the sale. [It is of no consequence that] the purchaser[/lender] did not accept [the stipulation] to return [the collateral] to [the borrower/seller] as a completely binding obligation – or even if [the purchaser/lender] did not make a promise in good faith to do so, but merely told [the seller/borrower] words that implied that he would return the property he sold [to him. Ultimately it is clear that] the seller[/borrower] relied on these words, and it can be assumed that it is with this intent that he sold [the item] to [the purchaser/lender], as indicated from [the seller/borrower’s] understanding that he [eventually] wants to negate the sale and return to [the property] he sold. Therefore, [the arrangement] is not considered a sale in a complete sense, the money is deemed a loan from the standpoint of the purchaser,211 and [the arrangement] involves interest in a complete sense. Weight should be given to their words [and] stringency should be followed [since] a Scriptural [prohibition is involved].

[One should not follow] the practice of many people who take a lenient [approach] and offer loans at interest on collateral via a sale. [These authorities allow a] borrower to sell an article [or property to the lender] and when the time [for] repayment of the debt arrives, allow the lender to resell it to him at a price higher than [the sum] he lent him, [i.e., the price the lender originally paid for the article or property]. This is interest in a complete sense according to the latter opinion.

Similarly, if the purchaser[/lender] stipulates that if he desires to return the property he purchased to [the seller/borrower] at a later date, [the seller/borrower] will return his money to him, [the transaction] is not considered a sale in the complete sense,214 and the purchaser[/lender] is forbidden to benefit from the article he purchased because [it would be considered accepting] interest.215

Similarly, if one purchased a home or movable property and paid [only] a portion of the money, he is forbidden to dwell in the house or use the movable property215 until he pays [the seller/borrower] the remainder of the money.216 [This law applies] even if the seller formalized the purchase with a kinyan sudar or another one of the [established] transactional acts (kinyanim) to take effect from the present time onward.215 [The rationale is that] it is possible that [the purchaser] will not pay [the seller] the remainder of the money at the [agreed upon] time, and thus the purchase will be nullified retroactively if [a stipulation was] not [made that if the full sum is not paid on time, the remainder of the money] is to be considered a loan.217

Likewise, the seller is forbidden to dwell in the home if the sale was formalized as effective from the present time onward215 or formalized with a kinyan sudar without conditions being made, for, [in such instance,] it is assumed that [the intent was that the sale would] take effect from the present time onward. [The rationale is that] it is possible that [the purchaser] will pay [the seller] on time and thus, retroactively, the house would have belonged to the purchaser [from the time of the sale] and the seller would have lived in it as payment for waiting for the remainder of the money [due him].

What then should they do?218 They should rent [the house] to another person, and whoever will ultimately be the owner of the home will
receive the rent. Alternatively, if the purchaser will dwell in the home, he should stipulate with [the seller] that if he does not pay him at the established time, the seller should deduct a rental fee from the portion of the money [paid originally] that the seller must return to him.219

Similar [rules apply] when a sale includes a conditional stipulation. [In such an instance,] it is forbidden220 for the purchaser to live in the home unless he stipulates [at the time the agreement is made] that if the condition will not be fulfilled and the sale is nullified, [when] the seller returns [the purchaser’s] money, he should deduct a rental fee for living in his home.221

If the condition is that if the house will collapse or be consumed by fire, or that the price of homes will [drastically] depreciate, [the seller] will return [the purchaser’s] money to him, it is forbidden for the purchaser to dwell in the house under any circumstances. [This ruling applies] even if [the purchaser] stipulates that [the seller] should deduct a rental fee [as payment for the time he lived in the house] when he returns [the purchaser’s] money. [The rationale is that] since the purchaser is likely to profit [from this arrangement] and unlikely to lose, his money is considered a loan in the possession of the seller. [Such an arrangement] is not considered a sale at all, even if the house does not collapse, is not consumed by fire, or does not depreciate in value, [and the purchaser will] be living in it as a fee for his loan.222

However, if the responsibility for the [possible] depreciation of the value [of the home] is not the seller’s – [he is responsible] only for a loss due to factors beyond his control – the arrangement is one where there is a potential for both profit and loss. Hence, it is considered a sale in a complete sense, as explained above.223

Similarly, when a person has a promissory note [owed him by another person] and he sells it to a [third party] for less than its face value224 because that [third party] pays him [before the date the note is due, the seller] is forbidden to accept responsibility for the debt.225 [For example, it is forbidden for the seller to agree] that if the borrower becomes poor and is unable to pay the debt, he will return the purchaser’s money to him. [The rationale is that in such an instance,] the purchaser is likely to profit and unlikely to lose his money. Thus, this is not considered a sale at all, but rather a loan. When the purchaser [i.e., the third party] will collect more from the borrower than he paid the seller [of the promissory note], he will profit from his loan. [The seller] may, however, accept responsibility [for a loss] that he himself causes, for example, if it is discovered that the borrower already paid him, or if any similar situation arises, he [can agree to] return the money to the purchaser, or [he can agree to] even [pay him] the entire amount written in the promissory note.

If [a lender] sells a loan [supported by merely] a verbal commitment to [another] person for less [than the debt],226 the purchaser [of the loan] must acquire it through a ma’amad sheloshtan, [a formal assignment of the debt].227 If that was not the case, [the purchaser] did not acquire [the debt]; his money is considered a loan, and it is forbidden [for the purchaser] to profit from it.228

All the above applies regarding a debt owed by one Jew [to another.] However, a debt owed by non-Jews may not be sold in this manner, because it cannot be acquired through any formal means of acquisition. The only way to transfer such a debt is by waiving it, as will be explained.229

Just as [a creditor] is permitted to sell a debt [owed him] to another person, so too, [the creditor] may sell it to the borrower himself, i.e., [the borrower] would give [the creditor an amount] less than the debt [owed] before the debt comes due.

When does the above apply? When the borrower pays the lender directly, for [in such an instance], he is purchasing his own debt. However, it is forbidden for the borrower to give another person a lesser sum of money than he owes the lender so that this person would
free him of his debt [by] paying the lender on his behalf when the payment comes due.

[The rationale for this prohibition is that the borrower is not considered to be] purchasing his debt from the lender by giving the money to this other person. [Instead,] the money [the borrower pays that person] is considered a debt that person [owes him] until [that person] pays his debt for him [when it falls due]. Thus, it is as if [the borrower] is lending money to that person so that when payment falls due, [that person] will pay his debt – [which is] a greater sum than he lent him. [The additional money that person paid to the lender on the borrower’s behalf] is considered interest [paid to the borrower] in a complete sense.

[The above applies] even if the other person could appease the lender and have him accept only the sum of money the borrower paid him. Nevertheless, since the [original] borrower owes a greater sum, and this person is freeing him of the obligation of his debt because he gave [that person] less, it is considered interest. [The original borrower is considered to have received] interest even though [the money] was not paid to him but to the lender. [The rationale is that], since he benefits by being absolved of his debt, it is considered as if [the money] was paid to him.

Even when one lends a maneh to another person on the condition that he give a dinar or [even] less [than a dinar] to a person to whom the lender is not at all indebted or even [on the condition that he give it] to tzedakah, [the arrangement] is considered as interest in a complete sense according to Scriptural Law.230 Since [the borrower] acts as an agent of [the lender] to pay the [money] on behalf of [the lender], it is as if [the borrower] paid [the money] to [the lender] directly. [This law applies] even if the lender did not explicitly tell
[the borrower to make the payment], but the
borrower himself offered to do so and the lender gave him the loan because of this [commitment].

However, the borrower is permitted to appoint an agent to pay [the lender] interest on his behalf, provided the [funds for the] interest do not come from the borrower, but [rather, his] agent gives [the interest payment] from his own funds. [In this instance] we do not apply the principle, “A person’s agent is like the person himself.” [The rationale is that the agent] is giving his own [funds] and not those of the [borrower who] sent him.231 [This leniency applies] provided the borrower does not tell the lender, “So-and-so will give you on my behalf.”

However, whenever the interest comes from the borrower, it is forbidden under any circumstances. [This applies] even if [it is paid] by a non-Jew, a deaf-mute, a mentally- or emotionally-challenged person, or a minor, who are not able to serve as agents232 and concerning whom, the principle, “A person’s agent is like the person himself,” does not apply. [The rationale is that] fundamentally, the Torah’s prohibition against interest [is that] the borrower’s money should not be given to the lender or to a place the lender desired that it be sent in any manner,233 not even if [given by] a monkey.234

Even when a third party gives the lender [money] of his own, [the third party] may not [then] go and take [the sum of money] he gave the lender from the borrower.235 This is considered haaramas ribis [i.e., interest taken deviously]. Needless to say, it is forbidden for the borrower to give the third party a present in the form of remuneration before [he receives the loan] so that [the third party] should endeavor to influence the lender to [give] him [a loan], and the third party gives the lender the present [the prospective borrower gave him] or something less or more [valuable].

Even when [the other person] does not give anything to the lender, but endeavors [to convince the lender to give the loan] without receiving anything, if he is the son of the lender and is supported by him,236 [the borrower] is forbidden to give him anything. [The rationale is that] it is as if he is giving it to the lender himself, since, [in such an instance, a person’s son] is [identified with his father. Thus, the money is considered as having been given to the father] and we are concerned about [the possibility of interest being given] deviously.

However, [if] a third party endeavors [to convince] the lender to give a loan without giving him anything, [the recipient of the loan] is permitted to give that person a present. [This applies] even if [the third party] acts as a guarantor for the borrower. [The rationale is that] it is permitted to receive a wage for acting as a guarantor. [Such license is granted even if that person] acts as an areiv kablan,237 whether having given only a verbal [commitment] or whether [his commitment was included] in a written contract which says that [the lender] may collect from either [the borrower] or [the guarantor], as he desires.

However, if the lender may not demand payment from the borrower [in a court of law], only from the areiv kablan ‒ for example, [the areiv kablan] gave the lender a promissory note of his own ‒ [then the areiv kablan] becomes the lender for the borrower. [As such, the borrower may not give the areiv kablan a present because] he is forbidden to receive recompense for this. [That would be considered] interest in a complete sense.

[However, the borrower may give the areiv kablan a present] when the borrower is also a signatory on the loan agreement and he is also obligated to the lender. True, [the lender] is relying primarily on the guarantor, who [in effect] is borrowing from him and lending to the borrower and, when the time for payment falls due, [the lender] will demand payment from the areiv kablan and the areiv kablan [will demand payment] from the borrower. Nevertheless, the present that [the borrower] gives the areiv kablan is not [being given] for this, for if [the areiv kablan] would think that the situation would arise where [the lender demands payment from him],238 certainly he would never have guaranteed [the loan] for [the borrower. Instead,] the present is for successfully [arranging the loan from] the lender, [i.e.,] to give the money to the borrower. [The areiv kablan does this] by guaranteeing the loan against the possibility and the doubt that the borrower might not repay [the loan]. This [– that the borrower will be incapable of repaying the loan, and thus the guarantor will be asked to pay –] was not the borrower’s intent at all when he gave the [guarantor the] present.

When does the above – that the areiv kablan is not considered a lender for the borrower – apply? Only with regard to receiving a present for the reason explained. However, [the areiv kablan] is considered the lender for the borrower with regard to interest that the borrower pays. For example, if the lender is a non-Jew who lends [money] to a Jew with interest, it is forbidden for another Jew to guarantee a loan for him – even if he is not an areiv kablan. As long as:

a) the non-Jew can demand payment from the guarantor [before demanding it from the borrower] according to the [prevailing] secular law,239

b) he can extract payment from [the guarantor] before he demands payment from the borrower,

c) [the non-Jew does not have to] compel [the borrower] to take an oath that he does not have [the means to repay the loan before demanding payment from the guarantor] as is the Jewish Law.240 [When these conditions are met,] the guarantor is considered the [one] borrowing [the funds from] the non-Jew, [and it is the guarantor] who [is considered to be] lending [the funds] to a Jew, [i.e., the borrower,] with interest.

Similarly, if a non-Jew borrows from a Jew with interest, [another] Jew cannot serve as an areiv kablan on his behalf.241 [The rationale is that] were the lender to desire, he could demand payment from [the Jewish guarantor first]. For this reason, when two [Jews] borrow money [i.e., they take out a loan as partners] from a non-Jew at the same time, they are forbidden to both sign a promissory note, which says that if [the non-Jew] desires, he may demand payment for all the money from [either] one.

Needless to say, it is forbidden to tell a Jew, “Borrow money for me from a non-Jew with interest.” [This prohibition applies] even if [the person taking the loan from] the non-Jew tells [him] who the [real] borrower is, and even if both
of them are signed on the promissory note. [Moreover, this prohibition applies] even if only the borrower is signed on the promissory note. [The rationale is that in all of these cases] the non-Jew has the right to demand payment from the agent [alone, since he is] a guarantor [for the loan].

There is even a prohibition [in an instance involving] two partners, when one borrowed money with interest from a non-Jew for the sake of the partnership, and paid [him] the interest [from the money of] the partnership. ([This prohibition applies] even when both [partners] are signed on the promissory note if the non-Jew can demand full payment from the one who took the loan [since he is also] a guarantor. [The rationale is that in this instance, the interest paid by the second partner is not considered interest paid by the partnership to the non-Jew, but rather interest paid by one Jewish partner to the other.])

[There is a way to permit such a loan.] If [the partner who took the loan from the non-Jew] does business with this money and [earns a] profit, he may first deduct the interest from the profit, and give it to the non-Jew, and then divide the remainder of the profit [with his partner. This is permitted] because the interest is considered a loss of the profit that they both suffered.

When does the above apply? When they both are active partners in the business. However, [this does not apply] if one [partner is a silent partner who] gives money to the other [partner] so that he can do business with it [in an iska relationship, enabling the silent partner to earn] half the profits [without investing any effort in the business of the partnership]. Should the person who invests the money [in the partnership] borrow money from a non-Jew at interest and invest it [in the partnership,] he is not permitted to calculate the interest as a loss of the profit [earned by the partnership. Instead, the loan he took from the non-Jew is considered his own personal debt and is not included in the reckoning of the partnership.]

Similar [laws apply when] the leaders of the community borrow money from a non-Jew at interest for the sake of the community.242 Even if the non-Jew knows that [the loan] is for the sake of the community, [nevertheless,] since [the non-Jew’s] dealings are solely with the leaders, [it is considered as if] they [personally] borrowed from him and [are subsequently] lending [the funds] to the community at interest. ([This prohibition applies] even if the non-Jew can demand payment from the community if the leaders do not repay him. Nevertheless, [in a situation where,] according to secular law, [the non-Jew] can demand payment from the leaders first [in their capacity] as guarantors, they are also halachically deemed to be the ones who borrowed from the non-Jew.)243

There is no clear license [for the leaders to take out such loans]. True, there are [authorities who] find justification for [their practice, explaining] that the leaders [of the community have the halachic status of] a guardian of orphans, who may borrow from a non-Jew at interest on their behalf and repay the interest from [the orphans’] property. However, the support [they cite itself] requires support. Who says that the [orphans’] guardians are permitted to act in this manner for the sake of the orphans!? Perhaps [such a loan] involves interest forbidden by Scriptural Law!

There are authorities who maintain that there is a way for the leaders of the community or for one of the partners [in a partnership] who go to borrow money from a non-Jew at interest to [facilitate such loans] in an appropriate manner. [These authorities suggest] paying the interest to the non-Jew immediately from the funds belonging to the community or the partnership. Thus, when the leaders or the partner bring the money to the community or to the other partners, they are giving them the loan without interest. There is no prohibition at all in giving the interest that the leaders or the partner took from the funds of the community or the partnership to the non-Jew, because they gave it as agents of the community or the other partners. [We follow the principle,] “a person’s agent is like the person himself,”244 and it is as if the community or the partners themselves gave [the interest] to the non-Jew. Even if [the leaders or the partner] did not tell the non-Jew that they are [acting as] agents of the community or the other partners, it is of no consequence, since the money they gave him as interest is from the funds of the community or the partnership.
It is proper to act in this manner to avoid [even] the possibility [of violating] a Scriptural prohibition.

All the above245 applies [when the prospective borrower] did not [provide] collateral. However, [a prospective borrower] is permitted to give collateral to another person and tell him, “Go and borrow money at interest for me from a non-Jew, [using this collateral].” The agent is [also] permitted to take the interest [payment] from the Jew and give it to the non-Jew, because “a person’s agent is considered as the person himself,”246 and it is as if the borrower himself gave the non-Jew the collateral and the interest, and borrowed the money from him [directly]. Even if the agent did not tell the non-Jew that he is [acting as] an agent of the borrower, it is of no consequence, since the collateral belongs to the borrower and not to the agent, and the non-Jew is relying solely on the collateral. [It can be assumed that] the security that the non-Jew has for his money is not [his ability to collect from] the agent at all, but the collateral, [as long as] the collateral is valuable. If [the collateral] is not that valuable, the agent must tell the non-Jew, “I undertake no responsibility whatsoever to you. Your security [for this loan] is solely this collateral.” When [the agent] makes such a statement, he may [take the loan at interest] even without collateral. However, he must tell [the non-Jew] that he is [acting as] the agent of the borrower [and tell him,] “The borrower alone bears the entire responsibility to you. [No responsibility] whatsoever is mine, not as a borrower, nor as [a guarantor from whom you can seek repayment of the loan, i.e.,] an areiv kablan.” The non-Jew [must] believe the agent and rely solely on the borrower [when seeking repayment of the loan].

When does the above247 apply? When, at the outset, [the person] borrowed money from the non-Jew on behalf of another person. [However, a different law applies] if [the person] owed the non-Jew money beforehand.248 Should the non-Jew tell him, “Give [the money you owe me] to that other Jew who wants to borrow it from me at interest. You will be freed from your responsibility [to me] as soon as you give it to the other Jew,” [the initial borrower] is forbidden by Rabbinic Law to hand [the money] directly to the other Jew. [This prohibition applies] even if the other [Jew] gives a promissory note and/or collateral to the non-Jew. [The rationale is that] since [the money] was [the initial borrower’s] responsibility until this time,
it appears as if he is giving his money [to a fellow Jew] at interest. Even if [the second borrower] does not give the interest to [the initial borrower], but rather [gives it] to the non-Jew, this is not at all effective [in allowing the arrangement], as explained above.249

What should [the initial borrower] do instead? He should [either] give [the money] to the non-Jew or place it down in front of him, and depart. The other Jew will take [the money] from there.248

Similarly, when a non-Jew borrows [money] from a Jew with interest via a Jewish broker, the law is the same as when a Jew borrows money from a non-Jew via a [Jewish] broker.250 The broker must tell the lender, “I am not obligated to you at all, not as a borrower, nor as an areiv kablan. The entire responsibility [for repayment of the loan] to you is incumbent upon so-and-so, the non-Jew.” Even if [the Jewish broker] deposits valuable collateral that the non-Jew gave him in [the lender’s possession], the broker may not guarantee [the loan] and tell the lender, “I will pay you the principal and the interest at such-and-such time, if the non-Jew will not pay.” 251

[Moreover, the broker is] even [forbidden] from taking responsibility if the money is lost due to factors beyond [the broker’s] control while it is being taken from the [Jewish] lender’s home to the non-Jewish borrower’s home and/or while it is brought from the non-Jew’s home to the lender’s home when the time for payment arrives. Similar [laws apply] regarding the responsibility for the collateral
while it is being brought and returned. All [the responsibility] – from the time of the loan onward – must be the lender’s and not the broker’s at all. [The broker] only [accepts] the responsibility of a watchman, [either] that of a watchman who receives a wage or that of a watchman who does not receive a wage if the lender does not pay him a broker’s fee. [The rationale is that] if the responsibility for a loss due to factors beyond one’s control is the broker’s, he would no longer be classified as a broker, and would [instead] be considered a borrower [taking a loan with] interest from the [Jewish] lender, who is then lending money to the non-Jew. If [the lender] is concerned that the broker will deny [his obligation] by claiming that the money or the collateral was taken from him by forces beyond his control, [the lender] should stipulate [with the broker] that [the broker’s] word will not be accepted unless [it is corroborated by] witnesses.

At the time of the loan, the lender must [clearly] tell the broker, “You are my agent to bring my money to the non-Jew, lend it to him, and bring [me] the collateral from [the non-Jew’s] home. Similarly, at the time when [the collateral that will be in my possession] will be redeemed, you will be my agent to bring me my money from the non-Jew and return his collateral [to him.”252 In this way,] the broker will do everything as the agent of the Jewish [lender] and not as the agent of the non-Jew, because [being appointed as an agent of the non-Jew] is not at all effective [in freeing the agent from the prohibition against interest. The rationale is that] the principle, “a person’s agent is considered as the principal,” applies only with regard to a Jew who becomes the agent of a [fellow] Jew, who appoints him as such.253

All the above254 applies to a broker who initially takes a loan for a non-Jew. [Different laws apply,] however, regarding a person who already lent money to a non-Jew with interest, [and the non-Jew gave him] collateral [to secure the loan,] and [the Jewish lender] then desires to borrow money from a [second] Jew with interest [using] the same collateral. [In other words, the first Jew gives the collateral he received from the non-Jew to the second Jew.] When the non-Jew comes to redeem his collateral from [his Jewish lender, the second Jew] will take [the interest owed him by the first Jew] from [the non-Jew]. The fact that the second Jew absolves the first one from [being considered] a borrower and a guarantor, [stating that] the collateral is totally accountable [for the loan] is not at all effective. [The rationale is that] even if the collateral is in the possession of the second Jew, all the interest from the non-Jew that accrues from the day [the second loan is taken out] belongs to the first [Jew] who lent [the non-Jew the money]. Thus, [it is as if the first Jew is paying interest to the second Jew because] the second [Jew] is receiving the interest [belonging] to the first [Jew] from the non-Jew.

The only way such an arrangement could be effective is through a sale, i.e., at the time [the first Jew] borrows from [the second Jew], he should say to the second [Jew], “I am selling you all the privileges, the rights, and the lien that I have on this collateral. I have no further business with you, nor do you have [any further business] with me.” [This is permissible because the collateral belongs to the second Jew. Hence,] even if the collateral is worth far more [than the value of the loan, should] the non-Jew never redeem it, the second Jew is not obligated to allow the first [Jew] to redeem it, unless he desires to do so out of his own free will. However, he has no obligation to do so.

This sale must be formalized through one of the means of transferring property [i.e., kinyanim] through which collateral, i.e., movable property, is acquired.255 If [a Jew] is owed a debt with interest by a non-Jew [and the debt] is not collateralized – even if there is a promissory note – there is no way to formally transfer the debt to another Jew, i.e., that [the other Jew] will lend him money and [in return,] he will take the interest [accrued by] the non-Jew from that day onward. [The rationale is that] there is no means [according to Jewish Law] through which a non-Jew’s debt can be transferred.256

What can be done to permit [such an arrangement]? The second Jewish lender should tell the initial [Jewish lender], “Waive [the debt] the non-Jew [owes you] and free him from all [obligations] in exchange for this money that I am giving you. With this money, I am purchasing any money that I can receive from the non-Jew.”257 True, a debt owed by non-Jew cannot be transferred through a formal transactional act. [Nevertheless, in this instance,] the initial Jewish [lender] withdrew [his right to the debt owed] through his waiver258 [of the debt. Thus,] the second [Jew] is not taking the interest [owed] to the first.

[Such an arrangement is permitted] provided the initial [Jewish lender] has absolutely no responsibility for the debt, [he can] not serve as an areiv kablan or even as an ordinary guarantor if [the second Jew] will not be able to collect anything from the non-Jew. [The initial lender] is even forbidden to take responsibility merely for the [loan’s] principal according to Rabbinic Law. [The rationale is that] he is likely to profit [from this arrangement] and unlikely to lose, as explained above regarding selling a Jew’s promissory note.259 If [the initial lender] accepts responsibility for the interest that accrues from the non-Jew [after he takes the loan from the second Jew], the arrangement is considered interest in a complete sense, [and is utterly forbidden] by Scriptural [Law].

[The above is forbidden] even if one lends [money] to a non-Jew with collateral, and then sells the rights to the collateral and the lien on it to another Jew. [The rationale is that] whenever the [initial] Jewish [lender] accepts responsibility to pay the interest from his own resources should the non-Jew not pay it, the [potential] interest [he will owe] is increasing while it is his responsibility. Although ultimately the non-Jew will pay [the interest], it is increasing while it is the Jew’s responsibility. [Hence,] the second Jew is forbidden to take [the interest] from the non-Jew.

All the above applies regarding a Jew who is owed a debt by a non-Jew with interest. However, [more stringent rules apply] when a Jew owes a debt to a non-Jew with interest, whether [the debt] is backed by collateral or it was given [solely] on credit. Should [the non-Jew] approach [another] Jew to borrow money by selling the first Jew’s debt together with the interest that will accrue [on it] from this day onward, it is considered interest in a complete sense, as [forbidden by] Scriptural Law. [This applies] even if the non-Jew takes the interest from the first Jew and gives it to the second.

[The prohibition applies] as long as the first Jew would be free from interest from that day onward, were he to pay his debt to the non-Jew on the day [the debt is transferred to the second Jew.260 The rationale is that] the interest that is increased from that day onward is accruing to the second Jew who purchased the debt from the non-Jew, and not to the non-Jew, since [at this time, the first Jew] is no longer obligated to the non-Jew at all.

When does [the prohibition mentioned in the previous subsection] apply? When the non-Jew sells the debt to the [second] Jew. However, it would be permissible if the non-Jewish lender] did not sell [to the second Jew] the debt [owed by the first Jew], but rather gave [the second Jew] the collateral that the first Jew gave him for the loan. [Furthermore,] the non-Jew did not sell the right to the collateral and the lien that he has on it, but rather he simply gave [the second Jew] the collateral [he received from the first Jew as collateral for the money the second Jew will lend him,] without any stipulation, in return for the interest that the first Jew will pay him from that day onward, so that the second Jew would take [the interest for the non-Jew].261

There are authorities who [disagree. They] forbid giving a loan to a non-Jew with interest [when, to secure the loan, the non-Jew] uses collateral that [another] Jew gave him [for a previous loan that is still outstanding. This restriction applies] even when [the first Jew] gave the collateral to the non-Jew [for a loan] that did not involve interest, and even when the non-Jew will himself redeem the collateral [from the second Jew.262 License is granted for such an arrangement] only when the first Jew told the non-Jew at the time he gave him the collateral, “If I do not pay you at the time when the payment is due, you will acquire the collateral ([retroactively,] from the present time),”263 and the time for payment arrived and [the Jew] failed to pay [the non-Jew,] and thus the collateral was acquired by the non-Jew. A meticulous person264 will give weight to their words.

All the above applies when the non-Jew already lent money to a Jew with collateral, and now [desires to use the Jew’s collateral as collateral] for a loan he seeks to take with interest for his own purposes. However, it is forbidden to give collateral to a non-Jew [for the purpose of] enabling him to borrow money from [another] Jew against it at interest, and then the owner of the collateral will borrow money from the non-Jew at interest.265 [The reason this is prohibited is that] according to Rabbinic Law, we rule that even a non-Jew may [be considered to be acting as a Jew’s] agent and is considered [as the Jew] himself – when this results in a stringency. [Thus,] the loan the non-Jew took with interest [from the second Jew] for the sake of the [first] Jew, is considered as if the [first] Jew took the loan himself.266 Therefore, one should not lend money to a non-Jew at interest, [using as collateral] a garment that non-Jews do not customarily wear,267 [since] it can be assumed that [the garment] belongs to a Jew who gave it to [the non-Jew as collateral] to borrow money [from a Jew].

Similar [laws apply when] a Jew lent money to non-Jew at interest or [even] without interest and afterwards, another Jew asked to borrow the money from the non-Jew at interest. It is forbidden for the initial Jewish [lender] to tell the non-Jew to lend it to [the second Jew] because [the non-Jew is considered to be acting as the first Jew’s] agent,266 even though initially, the non-Jew borrowed [the money] for his own sake.

However, if initially, the Jew lent [money] to a non-Jew so that he will lend it to a [second] Jew at interest, even if the [second] Jew pays the interest to the non-Jew and the non-Jew pays it to the [first] Jew, it is considered interest in a full sense according to Scriptural Law. The [act of] deception – lending [the money] to [the second Jew] via the non-Jew – is not at all effective268 since the non-Jew was not borrowing [the money] for his own sake. It is considered as if the Jew hired the non-Jew269 or gave him a portion of the profits so that he [will] lend [the Jew’s] money to [another] Jew with interest.270 This is forbidden according to Scriptural Law since the money belongs to the Jew and the non-Jew is not responsible for it.270

Even if the non-Jew accepted responsibility for the money, should it be lost due to forces beyond his control throughout the time that it is in his possession, that is of no consequence unless he accepts responsibility for the debt should [the money] be lost. [In other words, he agrees that regardless of whether the second Jew pays him,] he will pay the [initial] Jewish [lender,] as is the law regarding every borrower.

If a non-Jew hires a Jewish [broker] to lend his money to a Jew with interest, it would be prohibited, even if the Jewish [broker] bears no responsibility whatsoever due to the impression that would be created. [The prohibition applies] even if [the broker] informs the borrower and the witnesses that the money belongs to the non-Jew. [The only exception is if] the matter is one of public knowledge. In that situation, [the arrangement] is permitted, provided [that the Jewish broker] has no responsibility as a guarantor regarding the payment of the debt at the time it is due according to the [prevailing] secular law, as stated above.271

It is a mitzvah according to Scriptural Law272 to lend money to a non-Jew273 with interest and it is forbidden to lend him money without charge, as [the verse] states,274 “lanochri tashich.” [The verse can be interpreted as meaning,] “take interest from the non-Jew.”275 This is a positive commandment to take interest from [a non-Jew] and not to give him a loan without charge, as it is written,276 “Do not be gracious unto them,” [which can be interpreted as] “Do not give them a present without charge.”277 [The above does not apply] to a non-Jew with whom one is familiar,278 as stated in The Laws of False Deities and their Worshipers.279

A mumar280 who has separated himself [from the Jewish people] as a whole is considered as a non-Jew281 with regard to [the prohibition against] taking interest. It is
permitted to lend money to him with interest. [The rationale is that] since he worships false deities, he is a min282 and should be forced into circumstances where he will die.283 Since his life is considered to have been forfeited and can be terminated, certainly, that applies regarding his money. It is permitted to be destroyed.284 Similarly, one may take [such a person’s money] for oneself through any possible ruse. There is no concern that possibly virtuous descendants will emerge from him since he has become assimilated among non-Jews.285

There are authorities who maintain that as long as [a Jew] has not become a devoted worshiper of false deities, for example, a priest [who ministers to] false deities, he is not [deemed] a min and he should not be forced into circumstances where he will die. Similarly, his money is not considered to have been forfeited. It is desirable to give weight to their words and to avoid lending [to such a person] if possible.

All authorities agree, however, that it is forbidden to borrow from [such a Jew] with interest, because [by doing so, one violates the prohibition] against [placing a stumbling block] before the blind, [i.e., causing a person to commit a wrongful act,286] and [also violates] the prohibition against borrowing from [a fellow Jew] with interest. True, [that prohibition mentions “your brother” and] a mumar is not considered, our “brother.”287 [Nevertheless,] we are considered his “brothers,” and he may not take interest from us. [The rationale is that] “even though he has sinned, he [remains] a Jew.”288 [Therefore,] one who pays him interest violates the prohibition against interest being paid [from one Jew to another,] for [that command] is a warning to a borrower not to cause a lender to take interest in any instance where the lender is prohibited against doing so.289

[Different laws apply to] a Jewish min who has not become [totally] assimilated among the non-Jews, [even though] he violates prohibitions with the intent of angering [G‑d290] in the midst of the Jewish people, or he denies the Torah or [the fact that G‑d communicates to] the Jews through prophecy. Although he is among those who should be forced into circumstances where he will die, it is forbidden to lend him with interest according to all authorities.291 [The reason is that] even if his life is [considered to have been] forfeited, that does not apply regarding his money because it is possible that virtuous descendants will emerge from him and they will inherit [his estate].292

Needless to say, [the prohibition against lending with interest] applies regarding those who violate the Shabbos in public and those who are considered mumarim regarding the entire Torah with the exception of worshiping false deities,293 for they are not among those who should be forced into circumstances where they will die at all.

When a mumar who worships false deities has a son from a non-Jewish woman, the son is a non-Jew like [his mother].294 It is permitted to borrow from him and lend to him [with interest] – even though he is not among those who should be forced into circumstances where he will die295 – just as it is permitted to borrow and lend from [other] non-Jews [who are not products of mixed marriages with interest].296

However, when a mumeres [i.e., a Jewish woman who renounces her faith] has a son fathered by a non-Jew, [although] the son is a mumar like her, all authorities agree that it is even forbidden to lend to him [with interest].297 [The rationale is that such a child] resembles an infant taken captive by non-Jews. He does not resemble a mumar who is aware of his Master and intends to rebel against Him. [The latter] is deemed a min according to the first opinion [mentioned in subsection 76, above]. By contrast, [a child born to a mumeres] is not aware [of his Master]. Even if afterwards, he hears that he is Jewish and sees Jews and their faith, he is [still] considered as one who was compelled [not to observe the mitzvos], since he was raised among non-Jews according to their faith. All authorities agree that [such a person] is not included among those who should be forced into circumstances where they will die.

Similarly, all authorities agree that it is even forbidden to lend to the Karaites298 with interest.286 Although [the Karaites] deny the Oral Law,
they are not considered as epicursim with regard to being forced into circumstances where they will die because their denial does not stem from their choice. Instead, their ancestors caused their deviation and [their parents] raised them according to their [mistaken] faith. Thus, they are considered Jewish children who were captured by them and raised by them according to their mistaken [beliefs. Hence, such a person’s transgressions are considered to] have been caused by forces beyond his control.299

(There are authorities who maintain that, in the present age, the Karaites’ conduct has degenerated more [than it had in earlier eras, to the extent that] they are considered to be non-Jews in a complete sense. [Thus,] It is permitted to lend money to them with interest300 because they are considered to be denying the entire Torah. [The rationale is that] it is forbidden to offer them vital assistance301 and the prohibition against [lending at] interest is dependent on whether we are commanded to offer [the person involved] vital assistance,302 [as indicated by] the verse,303 “You shall not take from him interest or {any} increase… and {enable} your brother to live with you.”

[These authorities] apply the same law to the child of a Jewish woman who renounces her faith. It is forbidden to offer him vital assistance so that we are not raising a child to worship false deities.304 [Therefore,] even though [such a child] is not included among those who should be forced into circumstances where they will die – for non-Jews are also not included among those who should be forced into circumstances where they will die305 – [nevertheless,] it is permitted to lend him money [at interest] according to this perspective. (Regarding [one’s] actual practice, [when] a Scriptural [prohibition is involved], he should follow the more stringent opinion).306)