“If I make the slightest mistake, imagine how many people will be eating non-kosher meat because of me,” said the town shochet, the ritual slaughterer, to Rabbi Yisrael Salanter. “I cannot have this on my conscience any longer. I shall go into business instead.”
“Business?” wondered Rabbi Yisrael. “Do you know how many positive and negative commandments you have to worry about in business and how careful you have to be not to violate them? Stick with shechitah. You only have to worry about one.”
“You shall not rob.” “You shall not steal.” “You shall not defraud one another.” “You shall not oppress an employee who is poor or desolate.” “You shall not cheat in measures and weights.” “You shall not take interest.”
It would be wonderful, writes Rabbi Avraham Pam, if people would be required to take semichah in the laws of Choshen Mishpat, the laws of business integrity, before going into business.
Let us focus here on the prohibition against charging interest.
Interest is referred to in the Torah as “neshech,” from the word linshoch, which means to bite. Interest bites you like a snake and slowly devours you, explains Rashi. Interest is also referred to in halacha as ribbit, from the word marbit, to increase, because it increases the debt.
Ribbit is defined in the Talmud as agar natar, which means any compensation, whether in money or in kind, a Jew receives from a fellow Jew for having to wait for payment. If a transaction included ribbit, then according to the Rambam the lender would be in violation of six different Torah prohibitions, corresponding to the six times the Torah forbids the lender from receiving ribbit. The borrower would be in violation of three different Torah prohibitions, corresponding to the three times the Torah forbids the borrower to pay ribbit.
Unlike other monetary prohibitions, including the prohibition against ona’ah, the parties to a transaction cannot contract out of the ribbit prohibition. Even if the debtor agrees to pay ribbit, the transaction remains prohibited. The prohibition against ribbit applies equally to money, commodities, and services. Accordingly, if one borrowed six eggs from one’s neighbor, one may not return seven. If one’s neighbor painted one’s house free of charge, one may not paint his house if it is larger then one’s own house.
The prohibition against ribbit falls into two major categories. The Torah prohibition, known as ribbit ketzutza, and the rabbinic prohibition, known as avak ribbit. Categorizing ribbit as ribbit ketzutza or avak ribbit is of major importance. For one, ribbit ketzutza is recoverable by the borrower in court whereas avak ribbit is not. Also, as in other areas of halacha, there is more room for leniency and flexibility when dealing with rabbinic prohibitions than there is when dealing with Torah prohibitions.
Ribbit ketzutza, or Torah ribbit, occurs only in the context of a loan transaction (as opposed to a sale transaction) and only when the agreement to pay interest was entered into at the same time as the money or other item was loaned. If the maturity date of the loan arrives and the lender agrees to extend the term of the loan for an additional compensation, this too, according to some halachic authorities, constitutes ribbit ketzutza.
If the payment of ribbit was agreed to only after the money or other item was loaned, then there is no violation of ribbit ketzutza, but there is a violation of avak ribbit. A person who sends another a gift specifying that it is to encourage the recipient of the gift to lend him money, or a substantial gift even without such specification, violates the prohibition of avak ribbit. So too, a borrower who sends the lender a gift in articulated appreciation of a past loan that has already been repaid, violates the prohibition of avak ribbit.
An amount of money added to the price of goods to compensate the seller for deferred payment violates the prohibition of avak ribbit. This, however, is only the case if the seller explicitly informs the buyer that the extra charge is due to the deferred payment. There would, however, be no violation of avak ribbit if the seller simply charged an increased amount without specifying that it was to compensate him for having to wait for his money. The lender’s expenses in making a loan available, such as bank transfer fees or in collecting a loan, such as lawyer’s fees, are not considered ribbit.
Most authorities permit a Jew to pay interest to a corporation or bank if non-Jews own the majority of the corporation’s shares.