Loans and Loan Collection

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by R. Gidon Rothstein

Choshen Mishpat 97

When a Jew needs money, the lender has the opportunity to be truly helpful, while running the risk of violating the Torah in more than one way.

Lending Is a Form of Charity

AH begins the siman (Choshen Mishpat 97) with Shabbat 63a, where the Gemara said lending money is better than giving it as a gift, because it preserves the recipient’s dignity, gets the person back on his/her feet without the embarrassment or pressure of having to rely on handouts. Even better than a loan—although loans are our topic—is to invest with the other, take a split of the profits from whatever venture.

The charitable framework means many of the standards of charity carry over when choosing to whom to loan: relatives first, the poor of one’s city have greater call on loans than those from outside. As opposed to charity, though, a wealthy person might need a loan [by “need,” he means more than they want credit to expand their business empire, but that’s a digression too far for her], and that, too, will be a mitzvah. As is speaking with those in need, giving advice, part of gemilut chasadim, doing kindnesses for others.

Devarim 15;9 calls it beliya’al, base or unworthy, to refuse to lend someone in need. A starting point, the obligation to lend, both a charity and a kindness.

Treat Your Brethren Well

Once the money is in the borrower’s hands, both parties incur new obligations. Se’if two quotes Shemot 22;24, the lender may not act like a nosheh, a loan shark, pressuring for repayment when he knows the borrower does not have the money. “Pressure” in this context includes making sure the borrower sees the lender, an implicit reminder of the loan hanging over his head.

In se’if three, AH reminds us of how the borrower can mishandle the situation, based on Mishlei 3;28, do not force someone to come back the next day to secure money owed him/her, when the borrower already has it. Included in that, AH says one may not take a loan when s/he doesn’t need it [the definition of need can be subjective; I remember my father, a”h, telling of a friend who extended himself to lend money, only to find the other person had plenty of investments he chose not to sell, instead asked this guy.]

Along the same lines, Tehillim 37;21 denigrates an evil borrower who does not pay, and recommends a lender stay away from lending to such a person, since s/he the lender will be put into the position of having to extract payment, forced to act like a nosheh. Better not to get into the quagmire at all.

[A beautiful example of the challenges of halachah in practice. We are required to lend fellow Jews, one of the highest versions of tzedakah, unless we know they are the type to renege, putting us at risk of acting too aggressively to recover our money.]

Collateral Taken Later

Collateral taken at the time of the loan presents many fewer problems than when the lender later wants security for the collection of the loan. In that latter case, when the collateral is taken when the loan is due, se’if four reminds the court they cannot insist on the lender’s compassion, to give the borrower more time. The law is the law; perhaps other people can have a conversation with the lender, but the court’s job is to rule on and enforce the law. No rachamim in din, no warping the law to be kinder.

Sometimes, the lender might take collateral after the loan but before it is due, if s/he has convincing reason to believe the borrower is trying to avoid payment (is selling off assets, making future collection more difficult, or is moving far away).

The lender may not take such late-stage collateral him/herself, because the Torah (Devarim 24;10) rules לא תבוא אל ביתו לעבוט עבוטו, you (the lender) shall not go to his house to take his pledge. [Notice how many Torah laws regulate loans! I remember when I discovered the idea of content analysis, what we discuss, what we spend more time on, reveals what we truly value. It’s an important insight into how we can learn about what matters to us even if we are not aware of it.]

The prohibition comes with an obligation to return the collateral whenever the borrower would need it, a reason this prohibition would not generally incur lashes [the Gemara wonders about the value of collateral returned each time the borrower needs it; the answer has to do with its guaranteeing the lender can take back his loan even where other loans would be cancelled, but that’s not our topic here].

A Man’s Home Is His Castle

The lender is supposed to go to court, for them to send an agent of the court to request a mashkon. This agent, too, may not enter the house, must wait outside while the borrower finds and brings something.

This preservation of dignity focuses on the person taking the collateral—the court agent can do more than the lender—and the sacrosanct nature of the house. If the court’s agent (but not the lender, either due to a rabbinic rule to be sure he not get too caught up and go into the house or, for Rambam, part of Torah law) saw something outside the house to expropriate (a car, let’s say), s/he could take that. On the other hand, the lender may not enter the house even to inventory what’s there; choice of collateral is the borrower’s absolute choice, as long as it is equal to the value of the loan.

Se’if six points out the Torah here explicitly carves out an exception to avid inish dina le-nafshei, the general right of people to take what is rightfully theirs, without needing to go to court, let the other person sue if they think something has gone wrong. With all that, in cases where the lender (and court) have reason to think the borrower is deliberately working to evade the law, the court could authorize its agent to go into the house, to forestall the borrower selling the available collateral.

Objects Exempt from Being Collateral

Devarim 24;6 prohibits taking handmills or millstones for collateral, a prohibition tradition took to signal we may not take items needed for food preparation (because the verse said ki nefesh hu chovel, were the lender to take these, he would be collateralizing the person’s soul, as it were).

In se’if eleven, AH pointed out this isn’t about ensuring the borrower can still earn a living; a lender could take a barber’s shears or a plumber’s tools as collateral, just then have to return them whenever the borrower plies his/her trade. The Torah’s rule told us there is a special pain in losing an item that helped one secure food. Counterintuitively, the lender could also take actual food, because the Torah addressed the ways to get food, not the particular piece of food.

The Torah’s examples were hand tools, leading to se’if nine, a discussion of how these rules differ for a water mill or a mill attached to the ground in some way. Land is never collateral, it’s a form of collection of a loan. Once the time for collection has come, the lender might close a man’s mill (to pressure him to repay), and that would not constitute entry into his house, although Nimukei Yosef disagreed.

If the lender instead takes some part of the mill (to render it unusable, another way to pressure the borrower), the part he took becomes movable property, s/he would have to return it during work hours, and will have violated the prohibition against taking it in the first place. On the other hand, se’if ten repeats an idea we saw earlier, if the court realizes the borrower is moving or destroying properties to avoid collection, it is their job to intervene and protect the lender, sometimes even before the loan is due, the Vilna Gaon said.

In se’if twelve, we find out that if the borrower has multiples of these tools, if s/he uses all of them, they are still excluded from being taken as collateral. Nimukei Yosef held all these restrictions matter only to collateral; when the time comes to collect the loan, the lender has the right to take whatever is needed to recover his/her money [if he insists; the more of Jewish monetary law we learn the more reminders we see that law is not always the answer, we can andshould often choose paths more accommodating.]

The Widow

To close this time with an exception that reminds us of other values than who has the right to what money, 24;17 prohibited taking a widow’s possessions as collateral. AH in se’if fourteen explains that the rule is not a function of the widow’s financial wherewithal [a debate in the Gemara], it reflects the Torah’s awareness of her abiding distress over her life circumstances. It would not, therefore, include ordinary women or divorcees (although he knows Shach and Urim veTumim disagree).

AH wonders how widows would ever secure loans, if lenders know they will not be able to take collateral. He suggests the widow could volunteer the collateral (much as he had earlier said many of these rules do not apply to collateral given at the time of the loan, because those are much more freewilled).

It turns a “rule” into a values statement. The widow will likely end up having to give collateral, like any borrower, because otherwise people won’t lend to her. I think the Torah has given her an extra sense of agency, of independence, the knowledge that whether to give collateral is her choice, in contrast to all those other borrowers out there.

Small comfort if she needs a loan, perhaps, but comfort nonetheless, one more example of how the Torah thought loans were often thinly disguised charity, and set up rules to ensure they were given and collected with maximum possible care for the borrower, while still also protecting the lender’s financial interests.

I hope we’ll finish up the siman next time.

About Gidon Rothstein

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