Q&A: Interest
Interest
Question
A client of mine delayed payment for a long time, and now he paid and added a nice amount “for the delay,” in his words.
It sounds like classic interest. I’m not familiar with the details and leniencies regarding interest. He sees it as compensation—which I really do deserve. Of course, this was not stipulated in advance.
Am I allowed to accept it?
Answer
No. This is rabbinically prohibited interest (because it was not fixed in advance and it is not in the form of a loan).
Discussion on Answer
That is a tip, not interest. Interest is defined as payment for waiting for money.
If I want to be tricky and tell the client to treat it as a tip and not as payment for the waiting time: 1. Is that possible? 2. Do I need to return the money to him and have him give it again, or can we somehow decide retroactively or something like that?
There is room for that in situations where it is customary to give a tip. If it was given as interest, then it is interest. There are no after-the-fact fixes. And if you agree that you will return it and he will give you the same amount as a tip, that also does not help. That is just wordplay.
What is the boundary between a tip for work and interest?
Sometimes, when I have a professional where we agree on terms for the job and a certain payment at the end of the work, I give him a ten percent tip for the work and for the effort she put in during the job.
One example I had was a certain graphic design project that got delayed because we were waiting to get the lawyer’s approval for the fonts.
Part of the work was done, and part of the work was on hold until the matter with the lawyer became clear. Once it was finally resolved, I gave the designer a ten percent tip for her patience and for the good work she did during the project.
Is that a tip or interest?