Some years ago, a friend of mine called me up in a state of shock. At the time he was winding up a major real estate transaction together with other Jewish investors. The financing of the deal included interest payments, and my friend alerted his partners to the halachic prohibitions of paying interest — ribbis — and its possible ramifications on the deal. What surprised and upset him was his chareidi partner’s dismissive reply. His partner basically told him that at this point there were more important matters to worry about.
My friend was even more taken aback when I told him that this fine person’s reaction neither surprised nor shocked me. First, to be fair, he probably didn’t mean to ignore the issue but was, rather, just pushing it off until after the conclusion of the deal. Then, speaking from experience, I told him that in many people’s minds all ribbis problems are solved by signing a hetter iska document before the first payment of interest, and as such there is no need to rush.
Indeed, this incident is a classic example of people’s attitudes regarding hilchos ribbis and hetter iska. The prohibition of paying and taking interest — "ribbis mi'deoraisa" — applies to any loan for which the borrower guarantees the lender repayment of the principal plus interest. Poskim of the past several hundred years drafted the hetter iska as a halachically acceptable legal arrangement in which a lender can have his loan repaid with interest, while not violating the halachic prohibition of ribbis.
Money as a Commodity:
In the distant past, lending money with interest was not a typical commercial transaction among Jews. Money served principally as a means of buying and selling merchandise, not as a commodity for lending money with interest. More modern economic systems turned money into a commodity, and subsequently, lending money with interest became a regular profit-making endeavor. Jewish people in medieval times were compelled to adopt this business model early on as a result of socioeconomic factors. In many countries Jewish business was limited to lending money on interest and, despite the fact that it caused strained relations with the non-Jewish public, Jewish merchants became forerunners of the modern banking system.
Obviously, the downside to doing business in this way was the prohibition of ribbis, which limits lending money on interest to gentiles only. When investing money through a fellow Jew, it had to be structured as an unsecured investment, wherein neither the return of principle nor the interest was guaranteed. The poskim then developed the hetter iska agreement, in which the money changed hands not as a loan but as a deposit, wherein the recipient acted as an agent, handling the business venture without personally guaranteeing return. The novelty of a hetter iska agreement is a stipulation in which the investor (i.e., the one who gives the money) has only limited risk of loss.
A deal based on a hetter iska differs in spirit and in reality from a simple investment in which chances of profit and losses are shared equally. For example, a condition of many hetter iska documents requires a regular report of profits and losses, and the failure to provide such a report, backed by the testimony of two valid witnesses, is seen as being tantamount to an admission of there being profits realized on the investment, obligating the payment of the investor’s share of the supposed profits to him.
There was a discussion among the poskim early on regarding whether to view the hetter iska as a haarama, a deviant method that legalizes unlawful behavior. Therefore, as a matter of principle, some would prefer to abstain from business that necessitates this hetter. However, realities of life often force people to accept a bediavad — a second-choice — option. For instance, business deals that include terms of credit between Jewish partners, or that involve doing business with Jewish-owned banks, cannot be accomplished without a hetter iska. In other circumstances, the most convenient way for an individual who has some cash and desires to spend his time studying Torah may be the investing of money on a hetter iska basis. Determining one’s priorities in such situations is often a difficult call.
Actually, the haarama argument should not be a reason to deny the validity of the hetter iska. There are many instances in which Chazal instituted regulations that are pure haarama. For example, shemittas kesafim prohibits the collection of debts after the shemitta year. Hillel Hazaken observed that people were hesitant to lend money to the needy because of this, and so Hillel instituted the prozbul, symbolically transferring the power to collect the debt to a beis din, thus enabling the lender to collect his debts even after the shemitta year.
In the case of prozbul, the Talmud justifies this takana based on the fact that shemittas kesafim in our times is only deRabannan — a Rabbinic regulation — and therefore it cannot be applied as a proof to permit haarama in a case of a deOraisa commandment such as ribbis. Nevertheless, there are many poskim who validate haarama even in instances of a mitzva mideOraisa, based on a ruling in the laws of pidyon maaser sheini: If a person redeems his own maaser sheini and transfers its kedusha to coins, he must add a chomesh, a fourth of the maaser sheini’s value, to the coins, (the amount added being a fifth of the final amount). However, if he is redeeming someone else’s maaser sheini, no additional fifth must be added. If he wishes to, he may give his own coins to someone else for the sole purpose of having the recipient redeem the giver’s maaser sheini without having to add the additional fifth of value. According to the Chasam Sofer and others, this is proof that even in cases that affect mitzvos mideOraisa, haarama is permissible. Others, among them the Harav Efraim Zalman Margulies of Brody, author of the Beis Efraim, argue that pidyon maaser sheini is an exception, since the Torah explicitly allows this circumvention, based on a drasha, and is therefore no proof to other deOraisa instances.
Another application relevant to this dispute is the sale of chametz to a gentile before Pesach in order to avoid the prohibition of possessing chametz on Pesach. This transaction is performed solely to avoid the Torah’s prohibition, and has no economic value. As such, many poskim view it as a case of haarama and validate it only because bittul, the nullification of chametz, before Pesach included all chametz possessed by the owner, who now has an obligation only mideRabbanan to dispose of the chametz, and that obligation is accomplished by the sale.
A Boost to Mitzva Observance
The concept of haarama needs clarification. It gives the impression that halacha justifies loopholes as a built-in system, which seems inconsistent with a structure rooted in Divine inspiration. However, there is a particular case of haarama that is justified by Chazal and provides a rationalization for this principle in general. Trumos umaasros were separated from tevel after it was brought into the house from the field and became tevel mideOraisa — obligating one min haTorah to separate trumos umaasros. Chazal observed that in earlier generations, people used to bring the harvest into the house through the main entrance — which would obligate them min haTorah to separate trumos umaasros. However, in later generations people would carry the harvest into the house via the roof — a decidedly unusual method of transport, as in this way the harvest is only tevel mideRabbanan and not min haTorah. Since there is no financial gain in this case, one can only wonder why people would choose this strange technique of transporting the harvest, instead of the customary and much easier way of transporting it.
Even more surprising is the insight of Harav Moshe Teitelbaum, zt”l, author of the Yismach Moshe, who argues that this behavior is in fact praiseworthy. It is a cornerstone of Torah belief that the fulfillment of any mitzva is subject to one’s free will, and it is far from certain that one has the inner drive to fulfill the obligation perfectly. In fact, the greater the mitzva, the more willpower is necessary to do the right thing. Fulfilling a mitzva min haTorah requires more determination than a mitzva mideRabbanan, and this is precisely what concerned later generations. Being honest with themselves about their lower spiritual level as compared to that of earlier generations, they were nevertheless determined to fulfill the mitzva of separating trumos umaasros. Therefore, they chose to fulfill the mitzva on a level of deRabbanan and make certain that the level of the mitzva should not inhibit their commitment. They chose not to face the situation of having to perform a mitzva min haTorah, which might prove too challenging.
This argument may be applied to most situations of haarama. After all, the intention of the Torah-true individual is to fulfill his assignment in a manner that is appropriate to his spiritual level. This might sometimes result in applying halachic standards that enable one to avoid transgression of the law. If haarama was applied for that purpose, it is not only defendable but is in fact an accepted standard.
The episode described at the opening of this article, which my friend experienced, illustrates another result, albeit not desired, of the hetter iska. The circumvention of dinei ribbis leaves the unschooled individual with an impression that the prohibition of ribbis is merely a matter of formality, which requires signing some document, when in reality a hetter iska has very specific applications and will not always alleviate the prohibition of ribbis. For example, in situations of a partnership, a regular hetter iska might not be applicable, as may also be the case when one wishes to guarantee a credit. In addition, many poskim require that the iska-document be understood by the signatories of the deal. In a responsa, Harav Moshe Feinstein, zt”l, cautioned that hetter iska is not a lachash, a magic charm, but rather a legal agreement that requires a comprehensive understanding of the commitment, with clear halachic standards that must be met.
There are many examples in the body of our halacha of certain practices that are labelled as haarama, which developed over time. Some of these examples are acceptable, such as the prozbul, responding to challenges presented by conditions of life; and some are frowned upon. In our next article, be’ezras Hashem, we will discuss various examples and their applications today.