One would have to review the letters sent and the law in California but I am guessing here that the amount was computed within the time frame that the letter was recieved.  The fact that you have delayed caused the interest to accrue.  Now, if the interest is above the legal amount computed (and it certainly seems unreasonable her) then you have some wiggle room here.  But really you need to play hard ball.  Let them know that you qualify under Federal guidelines for a reduction of all debt (just bluff) and you are considering bankruptcy (I know, but bluff) to discharge the debt but you want to do the right thing.  You can pay off that amount in full and expect a satisfaction letter now.  Otherwise, who knows,  And if they continue to threaten you you will call the state attorney general and file a complaint.  Good luck.