Is it legal for them to do this

yes, they can turn down a payment if they consider it to be too small. Too better assist you may I ask the name of the collection agency , the balance you owe and the payment you offered them ?

I am curious if you are trying to settle in full or just send in a partial payment. If you are trying to settle in full for less than what you owe then it is not illegal for a collection agency to not accept the settlement offer. If you are just trying to make a payment then I would just write the check, stick it in their little envelope they usually provide along with the payment stub and send it in. Even if it is less than the minimum they say you have to make I guarantee they will accept it.

It really depends on the strategy you are going to take with the debt. If you make small partial payments it shows good faith if you ever have to go to court. Basically you can prove you intend on paying the bill but you just don't have the money to pay what they want. If you flat out don't pay the bill then you have a better chance at settling it for less later on down the line though. The second strategy is worse for your credit but if your credit is already bad then it won't matter much other than the risk of being sued.

Like Dollars said, they probably won't ever refuse a payment itself, no matter how small.

But them taking your payment doesn't mean they agree to your payment plan or settlement; if you don't send them "enough" to cure your default, they can still persue the balance. It is best to get any sort of payment plan or settlement in writing and signed by them.