Is a Credit Card Refund Halal if It Includes Potential Interest or a System Error?

Answered by Shaykh Muhammad Carr

Question

I’ve been in a complicated situation involving a Ponzi scheme and a credit card refund. I was scammed out of an initial investment of £88,000, but later received a refund of £112,287 from American Express, which included an excess of £24,608.53. I also received £43,000 from the scam over time, but lost £22,000 of it by reinvesting.

I have tried to return the excess £24,608.53 to American Express, but they have not taken any action. I want to make sure I handle everything in a way that is Sharia-compliant.

Can I keep the remaining £3,600 of the Amex surplus, especially since it seems to be an unclaimed surplus and could help offset the losses I incurred from the scam?

Answer

In the Name of Allah, the Most Merciful and Compassionate.

I pray you are in good faith and health. May Allah reward you for ensuring your sustenance (rizq) is permissible.

Allah says,

“And you may keep your original wealth, neither wronging nor being wronged.” [Quran, 2:279]

Allah says,

“O you who believe, devour not your wealth between you through falsehood.” [Quran, 4:29]

You are entitled to your initial investment of £88,000 only. You should donate the entire surplus, including the £3600, without expecting any reward, as you are doing so on behalf of the rightful owners of the wealth that was misappropriated through the Ponzi scheme.

Ponzi Schemes

A Ponzi scheme is a type of investment scam where returns are paid to earlier investors using the capital of newer investors, rather than from profit earned by the operation of a legitimate business. This creates the illusion of a profitable business, but it is unsustainable. Eventually, the scheme collapses when there are not enough new investors to pay returns to earlier participants. The scheme is named after Charles Ponzi, who became infamous for using this fraudulent method in the early 20th century.

Your Responsibility

The principle of Caveat emptor—let the buyer beware—is particularly relevant here. It is mentioned in the Hashiyat al-Jamal,

“Engaging in a vitiated contract, either with knowledge of its vitiation or due to negligence in learning about it—since it is something that should not be unknown to him, and he is in close contact with Muslims such that ignorance of it is unlikely—is also forbidden, whether the vitiation is text based or based on ijtihad.” [Sulayman ibn Mansur, Hashiyat al-Jamal]

General Rule of Unlawful Funds

The general rule that applies to disposing of unlawful funds is as follows:

1. Where the rightful owner is known, it must be returned to the rightful owner.
2. Where the rightful owner is not known [or if they refuse], the funds must be disposed of in one of two ways: a) it must either be given towards a charitable cause that benefits the public at large, such as public hospitals, schools, or mosques; b) or it should be given in charity to a person who is entitled by his need to receive charity. [Nawawi, Majmu‘ Sharh al-Muhadhdhab; Karaan, Disposal of Riba (Fatwa issued by the MJC)]

And with Allah alone is our success.

I pray this is of benefit and that Allah guides us all.
[Shaykh] Muhammad Carr
Checked and Approved by Shaykh Faraz Rabbani

Shaykh Muhammad Carr has dedicated his life to studying and transmitting our beautiful deen. His studies have taken him around the globe, where he has benefitted from many luminaries. Under the guidance of his teachers – Shaykh Taha Karan, Shaykh Yaseen Abbas, Shaykh Muadh Ali, and many others – Shaykh Muhammad has grown to appreciate the beauty and benefits of diverse scholarship. He completed his memorization of the Qur’an at Dar al-Ulum Zakariyyah in September 1997 and received an Alimiyya Degree in 2006 from DUAI (Darul Ulum al-Arabiyyah al-Islamiyyah). He is also affiliated with Masjid Auwal in Bo Kaap, Cape Town (the oldest mosque in South Africa), where he serves as a co-imam, and Dar Al-Safa, where he has taught since 2018. As a teacher, he imparts the wisdom of our heritage and tradition by opening the door to students. As an imam, he has the unique opportunity to serve his community in daily life.

In addition to his roles as a teacher and imam, Shaykh Muhammad Carr has contributed significantly to the administrative and advisory aspects of Islamic institutions. Since 2023, he has served as the Administrative Director at The Imam Kurani Institute, contributing to the institution’s growth and development. He continues to pursue traditional Islamic Sciences, possessing a keen interest in Islamic Contract Law and Finance. Shaykh Muhammad has been a Shari‘a Board Member for Islamic Asset Management & Insurance Companies since 2001, aligning financial practices with Islamic principles.