Editor’s note: Parties to a dispute are almost always supposed to seek compromise (peshara) rather than strict din. In fact, the Gemara (Bava Metzia 30b) states that Yerushalayim was destroyed because cases were settled based on din (rather than lifnim meshuras hadin). We encourage readers, therefore, to read this column – which often addresses human disputes – as a source of Torah knowledge, not a guide for ideal Torah behavior.
“I applied for a $30,000 loan to renovate my house,” Pinchas said to his brother, Asher, “but the bank is not willing to lend me the money at a reasonable rate.”
“Why not?” asked Asher.
“They’re concerned about my credit rating,” sighed Pinchas. “My business has been struggling recently.”
“I wish I could help somehow!” said Asher.
“I can’t expect you to lend me the money,” replied Pinchas, “but maybe you can take out a loan in your name at a lower rate? I’ll reimburse you for the monthly payments.”
“Actually the bank recently offered me a loan at an attractive rate,” said Asher. “I don’t need a loan now, but I could take it for you!”
“That would be very helpful,” said Pinchas. “Could you please check it out and let me know?”
“I’ll speak with the bank tomorrow,” promised Asher.
A week later, Asher said: “The bank approved me for a $30,000 loan. I’m happy to take it for you! I just ask that we sign a loan document between us.”
“That’s fine,” replied Pinchas. “I’ll write that you are lending me $30,000 and that I will cover the monthly installments until the loan is repaid. What about a heter iska?”
“Why should we need a heter iska?” asked Asher. “The loan is for you! You’re simply reimbursing me for the payment I’m making to the bank on a loan that I’m taking for you. I’m not gaining any interest!”
“I’d like to double-check with Rabbi Dayan,” insisted Pinchas.
“Sure, go ahead,” said Asher.
Pinchas called Rabbi Dayan and asked: “If my brother takes a $30,000 loan from the bank intended for me, and I reimburse him for the monthly installments, do we need a heter iska?”
“Yes,” answered Rabbi Dayan. “Without one, you can only pay the $30,000 principal. Paying the interest would constitute prohibited ribbis.”
“Could you please explain?” asked Pinchas.
“The Gemara [Bava Metzia 71b] discusses someone who wanted to borrow a certain sum of money from his friend who had just borrowed that exact sum from a non-Jew. If his friend loans him the money, he cannot charge him the interest that he pays the non-Jew. Even if the non-Jew told him to transfer the money, the second loan is considered a new loan between the two Jews since non-Jews cannot effect agency.” (Y.D 168/9:1, 2, 17; Taz, Y.D., 170:3)
“We can apply the same logic to the case at hand,” continued Rabbi Dayan. “Your brother is considered the bank’s borrower. If he lends that money to you, he is considered your lender. Only your brother is liable to the bank; the bank has no connection to you. Therefore, you need a heter iska.” (Bris Yehuda 6:20-23)
“What if the bank has a heter iska?” asked Pinchas.
“Ideally, there should be a separate heter iska between both of you or at least an explicit statement that your arrangement follows the heter iska of the bank,” replied Rabbi Dayan. “However, poskim are lenient; even if you do not address the issue explicitly and even if you do not know of the heter iska, the heter iska is extended to the second loan.” (Maharsham 1:20, 7:63; Toras Ribbis 17:14)
“What if my brother initially borrowed the money for his own use?” asked Pinchas.
“Then you certainly would need a separate heter iska,” answered Rabbi Dayan. “In that case, your brother was not an agent of yours; it is a new, unrelated loan.” (The Laws of Ribbis 13:36-37, 17:17-21)