Allied Interstate trying to collect debt already paid off

A department store mistakenly charged a pair of pants to an inactive account. Since we had moved a year and a half before and I pay the bills, the bill was never forwarded and my wife did not catch the mistake. When we were buying our house this past summer, a delinquent account came up on her credit history. We called the store's credit department, and after a very very very frustrating series of calls over the course of SIX MONTHS we were finally able to track down the agency with the debt. We paid the agency, with a 20% break on the debt (now about 5x the original charge). A week later, we got a call from the one and only allied interstate who claim that the payment we paid "doesn't matter" and that we owe them the money. They refuse to provide any validation other than a form stating that they are authorized to collect. We have sent them payment confirmation from the other agency, but they refuse to recognize the debt as paid.
Do I go the the FTC with this now? Do I report all three creditors?