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This Bank Functions Online -- and It's Torah-Observant to Boot

January 31, 2008 By:
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Jack Miller
When Gelt Financial Corporation -- a commercial lender founded by Northeast Philadelphia native Jack Miller -- purchased a small bank in 2006, it did so in the hopes of implementing a specific business model.

According to Miller, the plan involved turning the Public Savings Bank -- founded in the 1920s in Willow Groove -- into a virtual bank. The idea was for firms and individuals nationwide to be able to conduct the bulk of their business via the Internet.

The bank -- which is now based in Huntington Valley and has an actual branch building there -- even provides free check-scanning machines that automatically upload a deposit and place it in an account.

"The days of going to the bank and waiting in line and things like that are gone," declared Miller, 45. "It's all online."

But in addition to the normal set of bylaws and government regulations that financial institutions must abide by, Miller decided that his venture would turn to another, "higher" source for guidance.

"About a year-and-a-half ago, I was sitting in synagogue on Rosh Hashanah and I said, 'If we are going to be a bank, we are going to operate under the laws of the Torah.' It's as simple as that," said Miller, who is affiliated with the Chabad Lubavitch movement, but does not label himself Orthodox.

(Two years ago, Miller, along with his wife and three sons, left Bucks County for Florida. He still keeps an apartment in the area, and often spends several days a week in the office.)

Needless to say, there's a mezuzah on his office door. In fact, there's a mezuzah on every door at the company's new location on Philmont Avenue -- more than 70 of them! They're the most visible manifestations of Miller's ideal.

But what does Torah-observant actually mean? After all, unlike kosher supervision, no team of rabbis works on granting approval on how a bank conducts its business.

For starters, they're closed on Shabbat. Last month, the bank announced that it had received permission from the Federal Deposit Insurance Corporation and the Pennsylvania Department of Banking to close on major Jewish holidays, including Rosh Hashanah, Yom Kippur, and certain days during Passover, Sukkot and Shavuot, according to Miller.

However, customers can do their banking online seven days a week, 365 days a year. Is this arrangement an inherent contradiction?

"We don't see a problem with it. From a halachic point of view, it's not a problem," said Miller. "We're not here (physically). But you can't shut down a computer system or the Internet."

And whenever the company brings in food for an event, it's kosher, although employees are free to bring in nonkosher food.

"We don't try to impose our values on other people," he said. "Are we perfect? No. We do make mistakes, but, for the most part, we are a Torah-observant bank."

Lending and Transactions

More broadly, the bank tries to abide by the complex and numerous laws related to lending and transactions that are outlined in the Torah, Talmud and other rabbinic literature.

To implement this religious philosophy, Miller has consulted a number of rabbis, though none serves the bank in any official capacity. His younger brother, Ari Miller, a vice president at Gelt, has largely been charged with putting these ideas into practice.

Perhaps the most substantial religious issue regarding banking is the Torah prohibition against a Jew charging interest when loaning money to another Jew. In the Middle Ages, with many professions closed to them, Jews became the principal money-lenders and charged interest to non-Jews seeking capital.

Of course, this prohibition can be problematic when the purpose of a bank is to turn a profit -- and both the borrower and lender happen to be Jewish.

Fulfilling a Commandment

According to Rabbi Aaron Levine, chair of the economics department at Yeshiva University in New York, in the 16th century, Rabbi Mendel Avigdors of Krakow, after consulting Jewish sources, devised a way for Jews to loan funds to other Jews in a financial arrangement that's tantamount to a loan with interest, though it's not called such.

Some might call it a loophole.

Known as a Hetter Iska, the complex document essentially involves an agreement where a loan is reclassified as a business partnership, explained Levine.

"We are not doing it for the customer; we are doing it for God," said Miller, adding that the arrangement has no impact on dollars and cents, and is strictly about fulfilling a commandment.

"The customer doesn't even know about it ... . The customer is not getting anything and not losing anything by us doing it," he said, reiterating that's it not about the relationship between the bank and the customer, but between the bank and God.

The arrangement isn't exactly unique. Levine said a number of large banks in the New York area also do the same. But he doesn't know of any that claim to be fully Torah-observant.

Levine acknowledged that potential issues do exist.

First, he noted that, technically, federal and state law tend to prohibit banks from entering into commercial partnerships with clients.

Second, he explained that the language of the Hetter Iska creates what's known as a nonrecourse loan, meaning the borrower has an escape clause for repaying a loan, or at least the interest.

"A customer can get out of paying interest. It certainly theoretically could happen," said Levine, adding that he doesn't know of any cases in U.S. banking where such a dispute arose.

Miller did admit that scenarios like this one might be possible, but not likely. In such an event, it would probably have to be heard by the Beit Din, an Orthodox rabbinical court based in Philadelphia.

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