ALEXANDRIA, Va. (CN) - When Mary W. saw an advertisement for Morgan Drexen debt-consolidation services in November 2010, her circumstances had deteriorated considerably.
The death of her sister after a long illness had just forced Mary out of the home where they had been living together and into a small apartment that added rent to her concerns.
Getting by on less than $1,000 a month in Social Security and food stamps, Mary believed she needed help settling her debts. Though Mary was up to date on her monthly payments to creditors, the elderly widow owed $13,745.
"Mary was just trying to do the right thing," Angela Ciolfi with the Legal Aid Justice Center said in an interview. "She wanted to keep up with her debts and saw the ad on TV of all the people saying they were debt-free and she believed their promises."
Now bankrupt, Morgan Drexen faces a permanent injunction in the CFPB case, put in place just this past June, barring the firm from collecting more fees from its debt-settlement customers.
The injunction came too late for Mary, now 84, who filed a federal complaint last week against the individuals and entities that she says deliberately acted against her "interests - and against the interests of their other putative 'clients' - to enrich themselves and a company based in Costa Mesa, California, called Morgan Drexen."
Though she used her full name in the Oct. 30 federal complaint, Charlottesville-based Mary asked for anonymity when contacted for this article.
"During the nearly four years she paid Morgan Drexen and the network attorneys, [Mary] lived under austere conditions in which she could not always afford her medications or adequate nutrition, worried about her unresolved debts, was traumatized by being sued twice, and experienced deep distress about her financial condition overall," the complaint states.
Mary notes that she suffers from a serious heart condition, with two past heart attacks.
She had trouble affording her heart medication while paying Morgan Drexen's fees, yet the firm's agents continually tried "to persuade her to try to increase her monthly payments," according to the complaint.
"When I talked to her for the first time and told her she didn't have to pay these guys, she cried," attorney Ciolfi said. "She lived for almost four years under the constant stress of trying to make do with almost no discretionary income. It was pretty brutal, she worried constantly about her financial situation."
Mary's new attorneys say the widow never needed the bankruptcy services she ended up paying for but never receiving.
And "even if she had subsequently encountered difficulties paying her creditors on time, her Social Security income would have been exempt from collection," the complaint states.
The CFPB estimates that Morgan Drexen's scheme rooked 60,000 people like Mary out of $90.7 million in illegal fees, according to the complaint.
In Mary's case, she allegedly paid more than $8,000 between 2011 and 2014.
"Of all the money she paid, $6,119 was collected as fees from which the defendants profited, including over $1,000 for unnecessary bankruptcy-related services that the defendants never provided," the 46-page complaint states. "Only $2,504 was ever paid to [Mary's] six creditors, two of which had sued her."
With the estate of Morgan Drexen unable "to pay the administrative costs of the bankruptcy, let alone to compensate" victims, Mary "comes to this court to seek redress directly against the individuals who concocted and implemented this fraudulent scheme to bleed money from the most vulnerable members of our society," the complaint states.
Morgan Drexen is not a defendant to Mary's action, which instead takes aim at the lawyers designed in the Morgan Drexen scheme "to evade state laws regulating the for-profit debt relief industry, which typically prohibited providers from charging up-front fees and other types of abusive fees."
Ciolfi said Morgan Drexen is believed to have just $10 million in assets.
"That really tells us that consumers aren't going to get their money back from Morgan Drexen," Ciolfi said. "We're hoping that Mary can get compensated from the attorneys."
The complaint identifies these attorneys as Vincent Howard, Lawrence Williamson and James Bowman. Firm defendants include FerrisBowman and Williamson & Howard.
"By allowing Morgan Drexen to appear as the defendants' administrative agent, the defendants enabled Morgan Drexen to collect fees otherwise prohibited by applicable state law," the complaint states. "For their part in this deception, the defendants were compensated by Morgan Drexen."
The complaint says Howard and Williamson tried to continue the scheme after Morgan Drexen filed for bankruptcy and faced the June 2014 injunction.
Indeed, Howard wrote to Mary this past July, advising her that "your attorney will no longer use Morgan Drexen to service your accounts," adding that "[y]our lawyer is continuing to fight hard on your behalf in connection with your financial hardship and debts," according to the complaint.
"Upon information and belief, the attorneys at Howard Law, P.C. have collected several hundred thousand dollars from consumers in fees since Morgan Drexen filed for bankruptcy," the complaint states.
The CFPB did originally not name Howard and Williamson in the 2013 action, but Mary notes that the court extended the injunction to include them this past July, and held them in contempt just last month.
"The court agrees with CFPB's characterization of the evidence," the judgment said, as quoted in the complaint. "The court will not permit the attorneys to circumvent the court's orders by continuing essentially the same activities that were performed at Morgan Drexen and which the court found victimized thousands of consumers."
Attorney Ciolfi said there have been successful legal challenges showing that the Morgan Drexen business model violates consumer-protection laws, but that the co-conspirators keep trying to circumvent regulation.
"Every time one model is found to violate consumer protection laws, they reformulate the model to try to get around those laws," Ciolfi said.
One day before Mary's suit was filed, Dow Jones reported that the CFPB asked the federal court in California to impose a $133 million penalty against Morgan Drexen.
Mary's suit seeks damages for violations of federal anti-racketeering law, fraud, legal malpractice and other claims.
The Legal Aid Justice Center in Charlottesville filed the complaint with James Boykin of Hughes Hubbard & Reed, in Washington.
Williamson & Howard and Howard Law did not respond to request for comment.