It is only a good idea to pay the settlement if you have the money to do so. If you don’t then don’t pay them.
If you are disputing the charges, then legally they cannot be dunning you. It seems to be an underhanded tactic that this creditor is using.
So, if this is the case then you might to get a lawyer and look at your options under the Fair Debt Collection Practices Act to see if you have recourse. You can collect up to $1000 for each offense under the FDCPA plus attorney fees.
If you wish to see the FDCPA then goto this link.
I am so sorry that you are going through this! We had the same problem with GTE wireless, now Verizon. Anyway, we canceled our phone with them, paid our last bill, then about 6 months later got a current bill that wasn’t ours at all! I called all the people and got statements from them that they didn’t know us, and they were nice enough to send them to me. I sent it all to them and they still said it was my bill.
In the long run, after fighting it for 7 years we just took a settlement with the 5th collection agency that they have sent it to. So after going through what you are going through, I would settle and save the years of bad credit and headache of collection calls. Also, after we paid they updated our credit report to say that we had paid, which looks better then collecting.