[Avodah] early bird specials and ribbis

[Zev Sero]

David Riceman wrote:
> My son wants to go to a camp this summer which offers discounts if you 
> register (and pay) early.  I asked the camp director why there wasn't a 
> ribbis problem.  He told me he'd spoken to a posek years before and been 
> told it was OK, though he didn't recall why(!)  Can anyone provide the 
> missing explanation?

Because there is no prohibition on discounts for paying early.  The
prohibition is only on surcharges for paying late.  What matters is
when is the usual time that payment is due.  To take a trivial example,
one pays for a bus or train at the beginning of the journey, but for a
taxi at the end.  If a bus company offered people the choice to pay at
the end of the trip, for 5% extra, that would be ribbis, whereas if a
taxi offered a 5% discount for paying at the beginning, that would be
perfectly OK.

There is a heter-iska-like arrangement that is based on this din.
Suppose that you would like $100K of my money, and I would like to
earn $10K a year.  In the absence of the halacha of ribbis, I would
lend you the money at 10%.  But we can't do this, so we need an
arrangement that is not a loan, but gives each of us effectively
what we want.  Now suppose you have a property whose market rent is
$1250 a month, or $15K a year.  If someone were to rent this for 20
years, paying each month on time, that would come to $300K.  I sign
a 20 year lease, and in return for my agreement to pay the entire
rent in advance, you agree to give me a 2/3 discount, so I pay you
$100K.   I then put the property on the rental market, earning $1250
a month.  The lease also stipulates that at any time you can cancel
the lease, and refund the unused portion of the rent, pro rata.
Suppose you are ready to "repay the loan" after a year.  Since my
effective rent is $5K a year ($100K / 20), you pay me $95K and
regain possession of the building.  In the course of that year I got
$15K in rent, so I end up with $110K, exactly what I would have
ended up with had we done this as an illegal loan.

But, like a heter iska, this resemblance to a loan depends on
everything going according to plan.  The differences from a loan
emerge when things go awry.  If the building burns down then you,
as landlord, must supply me with an equivalent building or refund
my rent; so far it still resembles the outcome of a loan, unlike
the traditional heter iska, where if the business fails I lose my
money.  But suppose the building is in perfect condition but I fail
to find a tenant, and it sits empty for a time; that's my problem,
not yours, and I end up losing my "interest", or even my "principal".

-- 
Zev Sero               Something has gone seriously awry with this Court's
zev at sero.name          interpretation of the Constitution.
                       	                          - Clarence Thomas