Knesset Law Keeps Consumer Purchases 'Kosher'
Jewish law is very strict about the prohibition of giving or accepting interest, and in this case, the benefit customers would get for the two-week period – use of the service – would constitute interest, if a full refund were made at the end of the period.
A new Knesset law dealing with the consumer's right to cancel transactions concluded over the landphone, Internet or cellphone, is now "kosher," thanks to the intervention of MK Eliezer Moses (UTJ). He convinced members of the Knesset Economics Committee that the prohibition against accepting or charging interest was applicable to all Jews, not just religious Jews.
The new law, which the committee prepared for its second and third reading, will allow customers who purchase services over the phone or Internet to cancel their order within 14 days from the time of the beginning of the service. The reasoning behind the bill is to ensure that consumers are satisfied with the service, which they may not have been familiar with before ordering, but the new change gives consumers only a partial refund so they will not be guilty of accepting what amounts to interest.
The original draft of the bill provided for a full refund to consumers if they cancelled during the first two weeks of service. However, earlier this week the Jerusalem Badatz (High Religious Court) Committee on the Supervision of Finance and Investments issued a statement claiming that the change in the law would place Jews who cancel services in this manner in the position of accepting interest.
Jewish law is very strict about the prohibition of giving or accepting interest, and in this case, the use of services by customers during the two-week period would constitute interest, if a full refund were made at the end of the period, the group's Rabbinical authorities ruled. The temporary holding of the money by the company would in essence be a loan on the part of the consumer, and the use of the service would be considered interest under Jewish law, the rabbis ruled.
One way financial institutions, such as banks, are able to avoid the problem of interest, is by writing a special contract that reclassifies the interest payments as a partnership profit or loss, called a "heter iska." According to the rabbinical group, Jews who wanted to avoid interest issues under the new law would have to write such a contract with each company they did business with over the phone – an impractical, if not impossible solution. Instead, Moses lobbied for a change that would allow companies to charge a pro-rated fee for the period the service was used, that would be deducted from the refund amount. Thus consumers would pay for the time they used the service, turning the arrangement into a regular financial transaction.
Moses explained to members of the committee that "Judaism belongs to the entire Jewish people, not just the religious, and the prohibition on taking or paying interest is incumbent on all Jews." The Committee accepted Moses' changes, and the new version of the bill will ensure that any such deals are "kosher."