Urgent Need of Help with Payday Loans and Prosper

I took out a payday loan with Discount Advances in December of I think around 800.00. I was unable to pay it back in full and I have been dealing with Credit Protection Depot. I have made payments but unfortunately do not know exactly how much. They debited my account several times when I told them that bank account was closed. So they rec'd payments that way as well. I was unable to make a payment the last two months and have now rec'd the below letter. Before I contact them can someone tell me if they are legal and if so, am I to pay the interest or just what I borrowed. I am new to this site and have a read a lot but am not sure exactly what to do. I have several different questions regarding my debt. Here is the letter. I live in Alabama.

C[color=Blue]redit Protection Depot
Tracy,

PLEASE BE ADVISED THAT WE ARE CONSIDERING POSSIBLE ACTION THAT MAY REQUIRE A COURT APPEARANCE. YOU ARE HEREBY NOTIFIED THAT A RECOMMENDATION TO OBTAIN OUTSIDE REPRESENTATION TO COLLECT [/font]THIS LEGALLY BINDING DEBT MAY BE OUR NEXT STEP .WE ARE PREPARING TO TAKE WHATEVER COLLECTION ATTEMPTS THAT ARE LEGAL, THAT ARE DEEMED NECESSARY AND APPROPRIATE. PLEASE TAKE INTO CONSIDERATION THAT WE WILL MAKE NO MORE ATTEMPTS TO HELP YOU CLEAR THIS MATTER VOLUNTARILY AS WE HAVE HAD TO CONCLUDE THAT YOU ARE NOT WISHING TO CLEAR THIS MATTER WILLINGLY.WE REGRET HAVING TO TAKE THIS ACTION BUT FEEL THAT YOU HAVE LEFT US NO ALTERNATIVE. IF YOU WANT TO AVOID FURTHER ACTION, PAYMENT IN FULL MUST BE RECEIVED AND YOU WILL NEED TO CALL ME AT TOLL FREE 1-866-645-1661. WE MUST REQUIRE THAT YOU RENDER YOUR PAYMENT IN THE AMOUNT OF $1588.25 VIA WESTERN UNION QUICK COLLECT OR MONEYGRAM IMMEDIATELY. THIS PAYMENT REFLECTS YOUR BALANCE AS OF August 12th 2008.
PLEASE NOTE THAT WE MAY REQUEST POSSIBLE SERVICE IN ORDER TO TAKE WHATEVER STEPS LEGALLY NECESSARY IN ORDER TO PROTECT OUR INTEREST IN THIS MATTER. YOUR PROMPT RESPONSE WILL ONLY BENEFIT YOU. THIS IS OUR LAST ATTEMPT TO HELP YOU RESOLVE THIS WITHOUT THE NEED FOR OUTSIDE INTERVENTION.

This account may also be reported to CHECK-SKAN which is used in various states and if reported may decline your checks on a national basis!

The Western Union quick collect information is: (or you may go on line at www.westernunion.com)

1. Fill out the blue form for quick collect. (Or click the send now option)
2. The name of the company is Credit Protection Depot.
3. The code city: OFFER (ONE WORD NO SPACES).
4. The state is: Nevada.
5. The account number is your Social Security Number.
6. The reference number is your telephone number.

You can also use your debit card or various charge cards at www.westernunion.com (and using the quick collect option)

OR go to Moneygram and fill out the blue EXPRESSPAYMENT form.
1. The Company name is: CPD-OFFER
2. The Receive Code is: 4243
3. The City is: Las Vegas
4. The State is: Nevada
5. The Account Number is: 1430782139

If you are unable to pay $1588.25 for the entire balance of the loan, then we must require a minimum payment of $529.42 to place the account on legal hold.

If this account is referred for further review and action to our outside firm for additional collection efforts, it will commence activity on the account to be done to the fullest extent of the law in order to protect our interest in this matter. At that point, you will be responsible for all additional fees associated with the costs involved for the collection of this debt.

Please call us immediately with the Control Number of your wire in order to update your account and to avoid other action and charges to you. Our toll free number is 1-866-645-1661. Thank you for your prompt response in clearing this matter. It is appreciated.[/font][/color]

ANY HELP WITH THIS MATTER WILL BE GREATLY APPRECIATED. I REC'D THE E-MAIL ON AUGUST 12TH SO I NEED TO CALL AND DO NOT KNOW WHAT TO SAY.

Also, I signed up on the Prosper website but they ask for all of your personal information before you even get approved. Is this normal. I have four pdls and cannot pay them. I also have some other things I need to get caught up on. I know that borrowing money is not good to pay loans but I feel if i could start over - things would get better and would be able to say goodbye forever to pdls. PLEASE HELP