Capital Management Services is a thief!

Ok...let me tell you all a story...

May 09 I received a phone call from Capital Management (Cap Man) stating that I owed $1087 from Credit One Bank and that they were willing to settle for 60% in 6 monthly installments. Great I thought. I mean I've been in debt for a long time and this was the best thing that could've happened. So yes I gave them all the information (needless to say I was pressured by my significant other--she's tired of this). Cap Man told me they would send me a letter explaining the terms of the settlement.

2 months later, 2 payments later, no letter. I was upset so I called them and asked where the letter was. They said they had sent it out twice and it was returned twice (they later told me that they had the wrong zip code). They offered to fax it, but I was unable to get to a fax machine at the time (I thought I could).

I receive a letter mid August that was dated Aug 2 that stated I owed Cap Man $1,087 and that they were willing to offer a settlement of 70%. Again, I obtain this letter and I was shocked, angered, and very upset. No mention of payments and the elevated settlement offer.

I called on Aug 24th and was given the runaround (7 different transfers), was told that my account was no longer with Cap Man, was rudely hung on by a "supervisor", and then was told that I was giving them the wrong information--apparently I was supposedly dealing with Resurgent Capital Services not Credit One Bank. So my information was finally discovered and I was speaking to a very nice woman named Angela. After finally getting a chance to vent my frustation I told her that I was visibly upset by the whole process and wanted a higher authority to investigate why I receive the 70% settlement letter and asked that while this was going to be investigated to suspend my Aug payment and that I would resume in Sept. She told me that would be no problem and she would have her manager take care of it. I was so happy I even told her that I loved her.

So I contacted the Upstate NY BBB...figuring I would wait if I needed the NY AG's office.

Sept 2 comes and I check my bank...SOB's took out the payment! So I called. I spoke to a very rude woman named April who (after I explained my phone calls) proceeed to tell me that I did not speak to "the elusive Angela" and that no one told me that my payment was suspended. I was outraged. I told her to cancel my payments and to refund my money. She stated that she would not refund the money and that my account would be marked refused to pay.

Sept 3. I received a response from the BBB with Cap Man's response. They stated the terms of agreememt and that they did help me out once to push the second payment back a week but they then lied about everything else practically. Said nothing about the new 70% offer letter, and said that I was only upset about not receiving the original settlement terms letter. The response also stated that on Aug 24 I asked that all future payments be canceled and that they did that on that day which is another lie. Then the kicker...

a direct quote from the response:

"Capital Management Services will not be refunding the amount that Mr. XXXXX has already paid our office. ... The amount that Mr. XXXXX has already paid to our office has been applied to the account balance. As of September 3, 2009, Mr. XXXXX owes $1,087.28 on his account."

How the HELL do I owe $1087 when I've made three payments?! This is theft in my eyes and the NY AG's office will be receiving a complaint. Any more ideas?