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Ribis: A Halachic Anthology
Rabbi Joseph Stern

D. Installment Plans

One of the most popular forms of consumer credit is the installment plan. Monthly interest fees are charged. Rav Breish notes that such a credit arrangement poses more serious problems than ordinary terms of trade. Here, the Ribis is specified on a monthly basis, not merely implied. Whenever possible, a Heter Iska should be used. In emergency situations, it may be possible to invoke the Chavas Daas's suggestion mentioned previously (i.e. to include the interest charges in the item's initial price). Even if a lower price had been agreed upon, the vendor may cancel the deal upon being informed of the need for financing and then insist upon this new price).

E. Purchasing Securities from a Jewish Bank

Most transactions involving Ribis can be restructured as an investment deal, . However, according to the Chelkas Yaakov, one could argue that purchase of securities from a Jewish bank may not even be suitable for a . Ordinarily, a fixed percentage of the stock's price is paid immediately to the bank, while the rest is financed at market interest rates. This procedure is similar to other Ribis contingencies with one important exception. Unlike all other transactions where the borrowed funds are at least in the debtor's temporary possession, here the borrower never obtains access to the money. It is difficult to set up an investment company without an investor.

On the other hand, many extenuating factors exist. Firstly, purchases of stock are structured as a sale, not as an outright loan, and consequently are Avak Ribis. Furthermore, as previously discussed, commodities without a set market price are permitted to be sold at a small premium (up to 1/6 for delayed payment). Beyond that, the exact halachic status of a Jewish bank is not quite clear, as will be discussed. Rav Breish concludes that while these extenuating factors are not sufficient to permit stock purchases without a Heter Iska, they are potent enough to allow an investment structure to be established.

F. Prepayment of Goods and Services

A very popular means of "beating inflation" (especially in countries with triple-digit inflation) is to prepay, a pay-now-buy-later scheme. This very innocous gambit may involve serious Ribis problems.

One may not pay in advance for fruit (or virtually any other commodity) in the hope of guaranteeing oneself a stable price. The buyer is receiving a discount (today's price for tomorrow's commodities) in return for allowing the seller the use of his funds. If, however, the vendor already has this merchandise in stock or at least if the commodity is at the final stages of the manufacturing process, it is permissible to arrange prepayment. (According to some authorities, even under these circumstances, the goods may not be sold below cost). In addition, if the commodity has a fixed price, one may pay in advance for future delivery but only at that price. It is debatable, however, if prices that commonly fluctuate (market prices in urban areas) can be considered as fixed for purposes of this halacha.

As a practical example of the above principles, Rabbi Shlomo Englander, author of discusses the common practice of paying in advance for Tefillin. The sofer (scribe) doesn't have the merchandise in possession and can't even guess the market price at the time of the completion. Without a Heter Iska it may not be feasible halachically to pay in advance. Buying futures contracts at commodity exchanges may pose similar problems.

Similarly, it is not permitted to pay workers in advance and then obligate them to this (lower) pay scale later in the season (when wages have risen). Rav Breish however suggests that this restriction applies only to a day laborer () who is not contractually obligated to work. According to Jewish law, a laborer may withdraw at any time. Thus any funds advanced to him can not be construed as wages but merely as a loan and would be subject to Ribis laws. However, it is permitted to prepay a contractor (who according to halacha may not withdraw and is contractually obligated to complete his job) in exchange for submitting to a lower wage scale. In this case, any advance funds are interpreted as a prepayment of wages, not as a loan and are exempt from Ribis restriction. Rav Moshe Soloveitchik (of Switzerland) in a counter responsum disagrees, arguing that no distinction exists.

G. Rental Contract

It is permitted to rent utensils even though the renter is receiving consideration for the use of his property. Why is renting () different than lending money ()? Two explanations are suggested. Firstly, the renter () shares responsibility with the vendor, whereas total responsibility for reimbursement of a loan devolves on the debtor. For example, if the funds were destroyed by fire the borrower would still be obligated to pay back his debt. On the other hand, the renter wouldn't be liable for any accident () occurring to the goods. Another approach views the rental fee as a form of reimbursement for the depreciation of the renter's equipment. If neither of these extenuating circumstances applies (i.e. rental of silver or gold utensils, renting coins to a trade show) and if the renter bears full responsibility for damages and no depreciation is likely, any charges levied for renting would be Ribis.

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