State targets debt lawyer
AG says business uses unfair tactics on people outside of Harris County
Joseph Onwuteaka is in the debt-buying business, paying pennies on the dollar for old consumer debt written off long ago by banks, payday loan companies and retailers.
From a small office on the edge of Sharpstown, Onwuteaka sues consumers for often forgotten debts, targeting people who live far from the Harris County court where he files his cases and obtaining default judgments when they don’t appear in court to defend themselves. The first inkling of a problem for many consumers comes only when they try to use their debit cards and discover their bank accounts have been frozen through the collection efforts of Onwuteaka and his firm, Samara Portfolio Management.
Onwuteaka is a relatively small player in the debt industry, but he has caused financial havoc for hundreds of consumers in Texas through his machine-like efficiency and gained an outsized reputation for questionable practices — so much so that a cottage industry of local law firms has grown up just to defend consumers against his lawsuits. The State Bar of Texas has disciplined him for professional misconduct, and the Texas attorney general has pursued a case against him for nearly four years, alleging deceptive trade and debt collection practices.
Neither Onwuteaka nor his lawyer responded to requests for comment. In court filings, however, Onwuteaka argued that the attorney general’s law-
suit should be dismissed because neither he nor his company are involved in trade or commerce and the debtors are not consumers under the definition in Texas law.
That case is scheduled to go to trial Monday in state district court and will focus on whether Onwuteaka and his business tried to gain “unfair advantage” over consumers living outside of Harris County and violated state consumer protection laws that require debt collection lawsuits to be filed in either the county where the person lives or the loan documents were signed. Many of these cases would be dismissed if consumers were able to get to the court to challenge the venue or raise other issues, such as whether the debt exceeds the state’s four-year statute of limitations, consumer lawyers said.
But more than half the 1,500 lawsuits Onwuteaka and his businesses filed in Harris County are against consumers who neither live nor signed loan agreements here, according to the attorney general’s lawsuit.
Patricia Hikes, for example, lives in Austin. A decade ago, she took out a $2,500 payday loan in California but fell behind on payments when she got sick and could not work. So she was stunned to receive a notice to appear in a Houston court to answer Onwuteaka’s lawsuit.
“How am I supposed to come to Houston?” asked Hikes, who is on the attorney general’s witness list. “I don’t have the money for that.”
Hikes said she began receiving harassing calls from Onwuteaka after receiving a court order to pay $2,500, including court costs and interest. She recalls making one payment before the Texas attorney general’s office got involved in her case.
The tactics allegedly used by Onwuteaka are not unique in a debt collection industry that generates billions of dollars and affects some 70 million U.S. consumers. Debt collection practices have come under increasing scrutiny by the federal Consumer Financial Protection Bureau, which found in a recent survey that only one in four consumers who are sued appear at hearings. And when they don’t, the debt collectors win judgments that allow them to seize bank accounts and other assets.
“People don’t know their rights, much less how to enforce them,” said Southern Methodist University law professor Mary Spector, who specializes in consumer law. Past practices
Onwuteaka buys defaulted consumer debt through Samara Portfolio Management and then hires himself and his law firm to collect on the delinquent debt, according to court documents. He files so many cases that Weston Legal, a law firm based in Bellaire, advertises on its website that it specifically defends consumers against Samara Portfolio.
A lawyer for 31 years, he has run into disciplinary troubles with the State Bar of Texas, including a sixmonth suspension beginning in 2010 after a grievance committee found he signed his client’s name to an affidavit and attested that it was his client’s true signature, according to the state bar. He was allowed to continue to practice with restrictions part of that time.
Two years earlier, state district Judge Karen Johnson found Onwuteaka committed professional misconduct after he was sued by the Commission for Lawyer Discipline for allegedly switching out a page in the court reporter’s record and citing the false document as evidence, according to court records. Onwuteaka agreed to pay a $2,000 penalty.
In the case brought by the attorney general’s office, Onwuteaka was sanctioned by Harris County District Court Judge Larry Weiman two years ago for failing to produce information on the debts, including loan documents, postjudgment collection filings and collection efforts, according to court records.
The attorney general would not comment on the case.
The debts that Onwuteaka buys are mostly short-term, high-interest loans that include retail installment contracts for motor vehicles and jewelry. Despite Texas laws on where debt collection suits can be filed, Onwuteaka has been successful at obtaining default judgments against people who live outside Harris County.
That includes Marian Brown, who thought she paid off an old payday loan years ago. So Brown was surprised when she got a court order from Harris County — more than 200 miles from her home in Dallas — ordering her to pay $2,600 remaining on the loan she took out a decade ago with a 99 percent interest rate.
“My attorney said don’t worry about it,” said Brown, because the court in Harris County didn’t have jurisdiction. But then the dunning collection calls started, and she agreed to pay $40 a month. Brown is scheduled to testify during the trial. Home court
Debt valued at $10,000 or less is typically handled by the 16 judges who preside over the Harris County Justice of the Peace courts, which also handle traffic tickets, bad checks and evictions. Thousands of debt collection cases are pending in Harris County at any given time.
Debt buyers prefer to file their cases in justice of the peace courts because filing fees are $44, compared to $262 in state district court, and the cases move faster. Responses to lawsuits are due in 14 days rather than a minimum of 20 days in state district court.
Onwuteaka focused on one court in particular in filing his 1,500 lawsuits: Harris County Justice of the Peace Court Precinct 1, Place 2, according to the attorney general’s lawsuit. The judge presiding over that court is David Patronella.
Patronella bounces between two courtrooms in the Harris County annex building, one for traffic violations and the other for civil cases such as bad debt and evictions. He said in an interview that he doesn’t know why Onwuteaka filed so many cases in his court but speculates it’s for convenience. It’s the only justice of the peace court downtown, said Patronella, and his court gets more traffic than others because so many lawyers have offices downtown. “It’s not that they love me,” he said.
The question of venue — whether his court or another is the appropriate place to hear the debt claim — must be raised by one of the parties, Patronella said. Consumers can request a transfer by mail by sending a notarized statement that they live in say, Dallas County, and took out the loan in Dallas County, he said. But unless they make the request, Patronella said there isn’t anything he can do.
And once a judgment is entered, it’s too late to request a transfer.
“The court is basically a referee,” he said.
Some consumer lawyers, however, say Patronella is favoring one side. Jerry J. Jarzombek, a Fort Worth lawyer, said Patronella too easily issues “turnover orders,” which are typically used to seize hard-to-reach assets such as oil royalties or stock in a closely held corporation. Patronella, however, issues them for bank accounts.
In 2014, said Jarzombek, Patronella issued a turnover order against his client Cuong Pham, who lived in Grand Prairie, a city between Dallas and Fort Worth. Pham did not know he had been sued five years earlier by Onwuteaka or that a default judgment was entered to recover an old $2,000 jewelry store debt because process servers dropped off legal papers to the wrong address, according to court documents.
Pham challenged Patronella’s actions in state district court in 2015, contending the judge had no authority to enter a turnover order or appoint a receiver to seize Pham’s bank account. Harris County intervened and the default judgment against Pham was dropped, Jarzombek said. Pham got his money back.
“They do a ton of them in Patronella’s court,” said Jarzombek, who filed a similar lawsuit against the judge in March on behalf of another out-of-town consumer whose bank account was seized through a turnover order. “He will sign anything you put in front of his face.”
“That attorney is flat wrong,” responded Patronella. In fact, he said, he doesn’t have the right as a judge to unilaterally refuse to grant the requests.
Patronella said he makes sure both sides receive advance notice. But he can’t help it when consumers don’t pay attention.
“You can’t force them to show up,” he said.