Legal Question in Credit and Debt Law in California

Purchased a water softener from EcoWater from our local home show in 2006. We had a sales representative come out and address some concerns we had and how their unit would help our dry hair/skin, and water spots on our shower and faucets, etc. He showed us how dangerous our water was, and did the average sales speal. We decided to purchase the unit for approximately $4000 and financed it through their company. We were promised a free gift card to a local restaurant as part of our purchase, that we never received. Almost immediately, we noticed problems with our unit. We had permanent water spots on our shower and faucets, our hair and skin did not feel any different. We complained to the company that the promises their sales guy made turned out to be false. They agreed, saying that that particular representative had been fired because he was making false claims. The unit did not take care of water spots or dryness. So they sent someone out to check out our water unit and to professionally clean the water spots. At this point, our house was only about three months old. When the maintenence guy came out, he presented my husband with a bill. After an argument from my husband, the guy retracted the bill. He may have referred us to the company but I can't be sure. So, in early 2008, my husband lost his job and we became behind on our payments. I was making the payments the best that I could be sometimes they'd be a little late. Then I noticed that because I was one or two days late, my interest had increased and on top of the late fees, I wasn't even making a small portion of the balance. I had been working with a debt consolidation company with some of my other payments and decided I would put Aquafinance on there and hopefully get the interest knocked down and the late fees forgiven so I could get caught up. Almost immediately, I got a response from Aquafinance that the proposal amount for a monthly payment wasn't enough and they wanted more. I couldn't afford more and so I was stuck in the same boat I had been in. I tried working with the representative, Dana Harvey, and we have all the email correspondence between the two of us. Every time a payment was made, I got a statement that just showed a payment made. I never received a total balance or anything like that. So I requested a statement that showed where my payements were going and to my surprise, they were going all to interest! All of it! Of the $3400 I had paid out, I should have already been almost paid off, but I received another statement showing I owed $5000. As I sit now, my balance is $5094.00, more than what I originally owed, AFTER I've paid $3400. Apparently, when I had contacted Dana Harvey to help me with interest and payments, she remodified my loan amount without my knowledge or consent, and therefore, the payments were being made to interest only and because of my late payments, interest continued to accrue and continued to accrue so that the interest keeps increasing but my payements are never going to the principal. It's a never ending cycle and I don't know how to get out of it. We are looking to purchase a house soon and this is the worst mark on my credit report. I filed two complaints with the BBB and both came back unresolved. It was turned over to collections and it is showing over $5000 past due. I think we should be almost paid off. I was more than willing to make my payments and get caught up. Things happen, I have to feed my child, I have to wait till payday, things come up and sometimes payments are late. I shouldn't have to pay for the rest of my life, financially and otherwise for this. Also, if the payment was not received ON the due date, then the company was calling and harrassing. They called my husband at work after repeatedly being asked to. They made inappropriate comments, threatened to take our house, told us to sell our car and take the bus, would keep us on the phone just to argue with us. In addition to this, they have repeatedly pulled our credit report. Of the inquiries shown over the past two years, they tally more than half. I've never given them permission to repeatedly pull my credit report. We're trying to purchase a house and with this huge flaw on my credit report, it isn't happening. What recourse do I have?

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