Permitted Guarantees

Question

Gershon wishes to borrow a large sum of money from a
non-Jewish bank. He asks Eliezer to act as guarantor in order to enable
him to receive the loan. "Even though I will have to pay interest on
the loan, there is no problem for you to be a guarantor for me since the
lender is not a Jew," says Gershon. Is his assertion correct?


Answer

The Shulchan Oruch rules (Yoreh Deah,
170:1) that if a Jew borrows money from a non-Jew on interest, it is
forbidden for another Jew to act as guarantor on this loan. The reason
given is that according to the gentile legal code, the lender can first
claim repayment from the guarantor, who then collects the money from the
borrower. In this case, the guarantor is really lending money on interest
to his fellow-Jew, the borrower, which is obviously forbidden! However,
adds the Shulchan Oruch, if the non-Jewish lender agrees to first
claim from the borrower, it is permitted for another Jew to act as
guarantor. The Remo states that nowadays the usual custom is that
the lender first tries to collect repayment from the borrower. The
standard assumption is now that one may be an oreiv (guarantor) on
an interest-bearing loan from a non-Jew.

In (170:2), the Shulchan Oruch quotes an opinion
that the only forbidden type of guarantor is an oreiv shlof dotz. Shlof
dotz
is a herb which, in dried form, is used to cleanse the hands. An oreiv
shlof dotz
is a guarantor who completely cleanses the borrower from
responsibility for repayment of the loan. The lender deals with him and
not with the borrower. Thus, the guarantor becomes the real borrower, who
subsequently lends the money – on interest – to another Jew, who
originally received the money from the non-Jew. This obviously presents a
problem of ribbis.

Let us explain. There are three types of guarantor: (1)
Oreiv stam – a guarantor whose job it is to repay the loan only in
the event that the borrower does not do so. Since his guarantee only comes
into force once the loan plus interest is due, when the guarantor repays
this sum to the lender he is repaying the full loan as it then stands.
There is then no problem for the borrower to reimburse him for his
repayment. We regard the total sum repaid as principal, not principal plus
interest. (2) Oreiv kablan – the lender has the option of claiming
from the borrower or the guarantor, as he wishes. Does the fact that the
lender has the option of collecting directly from the guarantor make him
the real borrower? According to Rashi, it does. The Rashbo
disagrees. He argues that only when the lender actually invokes his right
to collect from the guarantor, does his responsibility begin. Only at that
stage does he becomes a guarantor for the total sum due. This is what he
reclaims from the borrower. There is therefore no problem of passing on
interest charges, since no interest is added to the sum on which he stands
guarantee. The Shach (Note 2) rules that in the first instance we
instruct the guarantor not to act as an oreiv kablan on a loan from
a non-Jew, in keeping with Rashi‘s opinion. If a Jew did agree to
act as this type of guarantor and had to repay the non-Jew, he should only
claim repayment of the principal sum from the borrower and not the
interest. However, if the borrower had already repaid principal plus
interest to the guarantor, the interest need not be returned (as would be
the law if this was definitely Torah-prohibited interest). (3) Oreiv
shlof dotz
– described above. What happens if the borrower has already
reimbursed the guarantor for the principal plus interest he paid to the
lender? According to The Shach and the Taz, since such
payment violates a Torah prohibition, the guarantor must return the
interest. The Remo holds that no return is required, since this is
only avak (secondary) ribbis. The Maharashdam (Responsa
to Yoreh Deah, No.66) goes even further. He is of the opinion that
the borrower may not deduct reimbursement for the interest from the
payment made to the guarantor. This guarantor derives no benefit from the
interest he receives. He is just being repaid what he paid to the non-Jew
on the borrower’s behalf.

Nowadays, the type of guarantee required on bank loans
often falls into the oreiv kablan category. It would therefore be
necessary to draw up a heter iska document before accepting such
responsibility. Eliezer must find out the nature of his guarantee before
agreeing to act as guarantor for Gershon.