Can they do this?

To make a long story short, I had an account that was to be charged off and struck a deal with the OC to avoid the charge off. I was to make 2 payments 2 weeks apart that equaled the amount of the one payment they wanted to avoid the charge off. I made the first payment and it was applied to the loan as they said. 2 weeks later I made the second payment thinking everything was cool, I waited for my bill in the mail. When I received the bill I was 2 months behind (2 payment were supposed to bring account current). I called them gave them my account number and they said it didn't exist. Turns out they applied my first payment to the original loan, then closed the loan and opened a new one that the 2nd payment was applied to causing me to be late again. Can they do this without my consent or knowledge? I have tried getting the first payment applied to the new account but they said it wasn't possible. I got pissed and quit paying. Saving the charge off really wouldn't have helped my credit any considering it was already totally f@#ked. I should have let it been charged off because that would have added another year under my belt for the SOL. Does anybody know if this legal/allowed? How can they have proof that I am responsible for the new account without a signature? Any input will be appreciated.

 

Thanks. The new account has since been charged off. I am dealling with the CA now and my validation letter is going out today. I think I am just going to avoid the OC as much as possible to avoid stirring things up with them.