possible FCRA violation

I settled with a collection agency and paid $979.00 of $1,300.00 to close the account.
Agency accepted payment.
Bank still reports to the credit bureau that I owe $321.00, the difference, yet admits, that I am not obligated to pay. They claim that I "settled in full" not "paid in full".
They further say that if I want the report to say "paid in full" I must pay the difference.
Is this a novel tactic to force someone to pay for a favorable report?

Are they hallucinating? Can you point me in the right direction?

[wtd]

I'm not a lawyer, so just an observation -

Seems to me the bank's position would be the correct one.
The collection agency and you 'settled' on an amount that was mutually agreeable and this is what the credit report says.
You didn't repay the debt in full, so the credit report should not reflect that you did.
I would imagine that they would change the credit report item to 'paid in full', if you indeed repay the debt in full.
You wouldn't be paying extortion to get a favorable credit report, you would just be paying the debt that you incurred in order to have a good credit report - as it should be.

wtd