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Guarantor isn`t Allowed to Stipulate an Addition

Answered according to Shafi'i Fiqh by Darul Iftaa Jordan
I work for a clearance company which pays customs charges on behalf of some clients. Actually, an additional amount (100-150JDs) is collected from clients who fail to make payment on time. We also reach an understanding with new clients whereby they can delay payment, but in return for a price higher than usual. Does this involve Riba(Usury/interest)?

Answer:
All perfect praise be to Allah, The Lord of The Worlds, and may His peace and blessings be upon our Prophet Mohammad and upon all his family and companions.

Payment of customs charges by the clearance company,on behalf of clients is an act of Kafalah(Guarantee: Pledge to present a debtor to pay his/her debt). The company acts as guarantor and pays off the debts of its clients, and, later, it collects these debts from them.

It isn`t permissible for the guarantor(Kafeel) to claim any addition to the original amount of debt since making Kafalah with conditioning the collection of debt from the client takes the ruling of a loan, and every loan that brings benefit is usury.

"If a person said to another: Make Kafalah and I will pay you a thousand Dinars; this isn`t permissible……..the guarantor is obligated to pay off the debt, and when he does; the person on whose behalf the guarantee was given must pay it back to him, and this is considered a loan. Once the guarantor takes that addition, the loan brings him benefit and thus it becomes unlawful."{Al-Moghni by Ibn Qhodamah, 4/244}.

Additions imposed by the guarantor on the person on whose behalf the guarantee was given against the latter`s failure to pay off the debt on time is an act of clear usury which is forbidden by Almighty Allah. Rather, it is similar to the usury that prevailed in Jahiliah(Pre-Islamic era). In that era, they used to say: "You either pay off the debt along with an addition against delay in settlement, or you pay it off right now, without an addition." This is whether the addition was conditioned in the Kafalah contract or not. Resolution No.(123) of the Iftaa` Board and resolution No.(109-3/12) of the International Islamic Fiqh Academy forbid the penal condition in settlement of debts. And Allah knows best.

This answer was collected from the official government Iftaa Department of Jordan.

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