Returning Interest That Was Wrongly Collected

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Returning Interest

Biblical Interest

  1. A person who took interest that was in violation of Biblical ribbit must return the ribbit and if he doesn't the courts can extract it. Nonetheless the courts can force a person to fulfill his mitzvah to return the interest.[1] He must pay with cash and not items worth cash.[2]
  2. Children of the lender who collected interest don't need to return it unless their father did teshuva before he passed away and didn't get to return it and in such a case they should return any unique item that their father collected as interest.[3]
  3. If a lender wants to do teshuva the lender should return the interest but the borrower shouldn't accept the interest in order not to prevent the lender from doing teshuva. That is only true if the majority of the lender's business and wealth is due to interest.[4]
  4. A transaction about which there is a dispute if it is Biblical interest or rabbinic interest if the lender collected it he doesn't need to return it and if the borrower grabbed it back he doesn't need to return it.[5]

Rabbinic Interest

  1. A person who took rabbinic interest is obligated to return it but the courts can't force him to do so.[6]
  2. A borrower who paid rabbinic interest can't force the lender to return it and if he grabs it out of the hands or domain of the lender he must return it.[7]
  3. A borrower who paid the rabbinic interest because a errant judge ruled he should do so is entitled to that money from the lender.[8]
  4. A lender who collected interest from lending a commodity and getting that same type of item in return (Seah Bseah) violated rabbinic interest and should return it but the courts can't extract it from him.[9]
  5. A person who took gifts to give a loan before the loan or a gift after the loan was repaid doesn't need to return it.[10]

Repaying Interest

  1. Biblical ribbit must be returned otherwise it is permitted to seek a bet din to collect it.[11]
  2. There is a religious obligation to pay back derabbanan ribbit.[12] Some say that this doesn’t apply to ribbit paid before and after the loan.[13]
  3. A person who took interest should return it. If he offers to return it and the other person forgives his fellow from paying him back the person who took interest can keep it.[14]

Mechila After the Fact

  1. If a person incorrectly took interest one should return it but if the borrower forgives the loan (mechila) the lender doesn’t need to return it.[15]
  2. If a person forced the borrower to swear that he would forgive the interest after he paid it, that is forbidden to give and take interest and the vow is in invalid.[16]
  3. The mechila has to be explicit and can’t be assumed by the lender since the borrower didn’t ask he forgave it.[17]
  4. Ideally instead of having the borrower forgive the interest the lender should really return the interest to fulfill the mitzvah of returning interest.[18]

Returning Items

  1. If was given a bunch of objects at a discount for the interest payment he must return all of the items he collected as interest or he needs to pay the fair price of the objects he collected. For example, if the borrower owed a dollar of interest and he gave the lender five pounds of wheat when the fair price was four pounds for a dollar, the lender must repay the borrower either all of the five pounds of wheat or the fair price of the five pounds of wheat which is a dollar and a quarter.[19]
  2. If a borrower gave a unique item for interest the lender must return it.[20]
  3. If the borrower stipulated to give a certain amount of interest and then gives an extra gift as well at the time of the payment that gift is considered rabbinic interest and the bet din can't force its return. Nonetheless, the lender has an obligation to pay it.[21]
  4. If a person stipulated to give an item as interest that item must be returned and not its value.[22]

Deducting the Unpaid Interest

  1. If the loan wasn't yet paid up and the borrower paid the lender rabbinic interest, some say that the amount of the rabbinic interest that was already paid is deducted from the capital and the difference is paid. However, others hold that the entire capital must be paid. The first opinion is the one accepted as the halacha.[23]

Rental

  1. If a person rented a house or any other item of the borrower for cheaper he needs to return the difference between the discounted price and the full value because that discount was Biblical interest that he collected.[24]
  2. If a person rented a house or another item of the borrower and overpaid, but the amount that he paid was all money that he gained from stipulated interest, he must return the full amount that was stipulated.[25]

Document with Interest

  1. If a person has a loan document stating that a person owes capital and interest the document should be ripped up.[26]
  2. A loan document with interest can be used to collect the capital and not the interest.[27]
  3. If the document included the capital and the interest and didn't specify what part of the obligation was capital and what was interest he can't use that document to collect anything.[28]

Converting an Interest Loan into a Heter Iska

  1. Some hold that it is evading ribbit and forbidden to convert an interest loan into a heter iska.[29]

Repaying Interest Paid to a Third Party

  1. Regarding when tzedaka was paid as interest from the borrower, see the ramifications discussed here: When_Is_It_Permitted_to_Benefit_the_Lender#Payments_from_a_Borrower_to_a_Third_Party

Repaying Interest Paid by a Third Party

  1. If a person borrowed from another Jew with interest and then gave his loan to a third Jew, that third Jew doesn't have to pay the interest and if has to go to Bet Din to exempt himself of interest, the original borrower has to pay for his expenses.[30]
  2. If a person borrowed from another Jew with interest and then gave his loan to a third Jew, but the lender claims that the interest was permitted since they used a heter iska or the like, then the third party is obligated to pay the interest.[31]

Sources

  1. Shulchan Aruch 161:5
  2. Chelkat Binyamin (Biurim 161 s.v. ratza), Netivot Shalom 161:8:5
  3. Shulchan Aruch 161:6
  4. Shulchan Aruch 161:7
  5. Shach 161:4. See Avnei Nezer YD Brit Avraham who questions it.
  6. Shulchan Aruch Y.D. 161:2
  7. Shulchan Aruch 161:3
  8. Shulchan Aruch 161:4
  9. Shulchan Aruch 161:1
  10. Based on the Rashba's teshuva, Rama 161:2 writes that ribbit before and after the loan isn't as serious as other cases of rabbinic interest and doesn't need to be returned. The Gra 161:8 explains that the reason that ribbit that is before or after the loan doesn't need to be returned is because it is was given as a gift. Chelkat Binyamin 161:18 agrees.
  11. Rabbi Elazar 61b, Shulchan Aruch 161:2
  12. The rishonim debate whether there’s a religious obligation to pay for deoritta ribbit according to Rabbi Yochanan who says that there isn’t a monetary claim upon the lender. Tosfot 62a s.v. tenay holds that there’s no obligation but Rivan holds that there is. Rashba 62b cites the discussion and Ritva sides with Tosfot. Nemukei Yosef 34a sides with the Rivan. The Rashba concludes that there’s no practical application to this dispute because we hold that there is a monetary obligation to return ribbit. The Ran and Ritva argue that from this discussion you can learn how to treat rabbinic ribbit whether this is a religious obligation to return ribbit derabbanan. Ritva holds that there’s no obligation to return rabbinic ribbit, however, the Ran and Nemukei Yosef holds that there is. Rashba holds that there’s no obligation. Riaz Bava Metsia 62a s.v. elah accepts the Rashba that there’s no comparison between what Rabbi Yochanan held to what we should hold for rabbinic ribbit since Rabbi Yochanan held that someone who collected ribbit owns the money he collected but Rabbi Elazar argues that it isn’t his at all. He concludes that for rabbinic ribbit it doesn’t need to be returned if a person is doing it as part of teshuva. Shulchan Aruch 161:2 holds like the Nemukei Yosef.
  13. Rashba 5:187 writes that if a person gave ribbit after the loan the receiver doesn’t have to return it even as a religious obligation and he adds that ribbit after the loan is less serious than other forms of rabbinic ribbit. Rashba 1:938 writes that the prohibition of giving ribbit after the loan only applies to the receiver and not the borrower. Bet Yosef 161:2 cites the Rashba as a proof that there’s no religious obligation to return ribbit paid after the loan. Rama 161:2 codifies this opinion.
  14. Rambam Malveh Vloveh 4:13 and Rosh b”m 5:2
    • The Raavad 4:13 agrees with the Geonim that forgiving the loan is ineffective. Their reason is that it seems that the torah invalidated forgiving the interest as is always the case of interest, even though a person willing lends money with interest it is still forbidden. Similarly, the Geonim say that interest that was taken illegitimately can’t be forgiven and needs to be returned. The Maggid Mishna clearly states that the Rambam agrees that forgiving interest in advance doesn’t permit the loan. Otherwise that would undo the prohibition of interest.
  15. Shulchan Aruch YD 160:5, Rambam 4:13 argues with the Geonim who held that mechila enver worked for ribbit and the Rambam holds that it is worked after the fact.
  16. Ritva Bava Metsia 61a s.v. ma, Bedek Habayit 160:5
  17. Pitchei Teshuva 160:1 citing Yavetz 1:147
  18. Chelkat Binyamin 130:35 writes that if the borrower forgives the interest the lender didn’t fulfill the mitzvah, though he is exempt. Rather the lender should pay the borrower.
  19. Rava in Gemara Bava Metsia 65a, Shulchan Aruch Y.D. 161:8. The Netivot Shalom 161:8:1 writes based on the Ramban that the reason for Rava is that since the fifth pound of wheat was acquired as a result and a benefit of the interest payment it is included in the interest and must be returned.
    • The reason that the lender has the right to return the wheat thereby invalidating the sale is because he can claim that had he known that he wouldn't have been able to keep the interest he never would have paid a dollar and a quarter for the five pounds of wheat. This is the reason of the Mishna Lmelech (Malveh Vloveh 8:15 s.v. vda) cited by Chelkat Binyamin 161:67. However, Chelkat Binyamin in fact points out that the Nemukei Yosef b"m 39a clearly holds otherwise. The sale is valid automatically and the lender can only invalidate the sale if both the borrower and lender agree. The Netivot Shalom 161:8 5 makes the same point and in fact argues that the Shulchan Aruch also means this in line with the Nemukei Yosef (also considering that the Bet Yosef cited the Nemukei Yosef without any argument or disagreement).
  20. Shulchan Aruch 161:9
  21. Netivot Shalom 161:8:2 writes that since there's no connection between the interest and the gift and so the gift is only rabbinic interest and it isn't similar to Rava in Bava Metsia 65a.
  22. Pitchei Teshuva 161:9 citing the Mishna Lmelech (Malveh Vloveh 8:15)
  23. Shulchan Aruch and Rama 166:3. Rif holds that if someone owes rabbinic interest it isn't deducted from the capital because doing so is like removing the lender from what he is entitled to and bet din doesn't force returning rabbinic interest. However, the Rosh cites Rabbenu Efraim who holds that unless deducting the interest will cause the borrower to have to leave a field left to him as a collateral, generally the rabbinic interest is deducted. Shulchan Aruch 166:2 cites both opinions and the Rama follows the Rabbenu Efraim.
  24. Shulchan Aruch 161:5
  25. Shulchan Aurch 161:10
  26. Rama 161:11
  27. Shulchan Aruch 161:11
  28. Shulchan Aruch 161:11
  29. Yabia Omer YD 1:13 forbids this because of haramat ribbit unlike the Rav Poalim YD 4:11 who allows converting a loan with interest into a loan with a penalty if not returned by the delivery date. Yabia Omer argues that doing such a conversion is haaramat ribbit. Radvaz 3:511 writes that haaramat ribbit depends on the time and place and in a generation that isn't careful in this area more cases are forbidden.
  30. Mordechai b"m 327 citing the Maharam, Bet Yosef 168:26 quotes the Mordechai
  31. Mordechai b"m 327 cited by Bet Yosef 168:26