Permitted Loan Charges

Question

Binyomin
wishes to lend Yechiel a substantial sum of money. However, his money is
tied-up in a long-term savings account and he has to pay a penalty for
premature withdrawal. Furthermore, Binyomin uses interest from this
account to pay his children’s school fees. Yechiel requires the loan in
the form of a banker’s cheque, for which the bank makes a charge. It
must be delivered to the lawyer of a construction company in another town.
May Binyomin pass on the cost of any of these expenses to Yechiel, or is
there a problem of ribbis?


Answer

The
Torah forbids lending money to a fellow-Jew on interest. This means that a
lender may not be compensated for any potential loss of profit incurred as
a result of lending this sum of money. Although his money was not
available to him for investment and earning profit, to charge the borrower
for this loss of opportunity for gain constitutes ribbis. Even if
he is a pensioner and wishes to use part of his pension fund to grant a
loan, he may not ask the borrower to compensate him for this loss of
income. Furthermore, in the event that the borrower is late in repaying
the loan and this results in the lender missing a profitable business
opportunity, the lender is still forbidden to ask the defaulting borrower
for compensation. Generally, if one person withholds another person’s
money and thus causes him to miss an opportunity to earn a profit, he
could be liable to compensate him for loss of earnings (mevatel kisso
shel
chaveiro). However, since the money in this case was given
as a loan, such compensation is forbidden because of ribbis.

Do
all expenses incurred as a result of lending money fall under the
prohibition of ribbis? As mentioned above, only loss of profit may
not be claimed from the borrower. However, any genuine expenses which stem
from making the loan available to the borrower may be claimed from him.
This would include bank withdrawal charges and any other bank charge, with
the exception of interest. Similarly, if the lender requires security for
the loan or proper legal documentation, the cost of providing such
services may be passed on to the borrower. Note that the lender is permitted
to charge the borrower for all the above expenses. We have not stated that
the borrower is automatically legally bound to pay them. Rav Blau (Bris
Yehudah
, Chapter 9, Note1) shows that passing on such charges is
permissible since our Sages obligated the borrower to pay the
scribe’s fee for drawing up the bill of debt (a modern day equivalent
would be paying for typing the appropriate document). If all expenses
involved in granting the loan fall under the prohibition of ribbis,
how could they have forced the borrower to pay this fee? He brings a
further proof from a ruling of the Remo. In Yoreh De’ah
(172:6), the Remo rules that if a borrower gave another person’s
house as collateral for a loan and the owner charged the lender rent for
his unlawful tenancy, the borrower is obligated to repay the rental fee to
the lender. The Taz (No.14) explains that although the borrower is
paying the lender more than he received from him, this does not constitute
ribbis. He is just compensating him for a genuine loss for which he
was to blame. 

We
can therefore conclude that Binyomin may pass on all charges connected to
providing the loan, including bank charges, lawyer’s fees and delivery
charges. He must not ask to be compensated for loss of interest or any
other loss of profit, since this is the essence of the prohibition of ribbis.
Yechiel is legally obligated to pay any expenses involved in drawing up an
appropriate document.