The problem with the court system is that they would have to
prove actual damages. They could recover fees, deposits, etc., but as for losing the house (if their deal fell through), they have lost nothing but time. And it would depend on the judge whether or not to reward anything for inconvenience. It depends on how good of an attorney they'd get, and how bloodthirsty he/she is.
I would take it up with the FTC, as placing erroneous data on credit reports is illegal. (My other half works in the legal department of a collection agency, so we know all about "compliance" here.) All they need to do is file a complaint with the FTC, if the matter is not resolved. Big Red will claim that it was due to a computer error of some kind (that's a BS excuse they gave, BTW), but the FTC should force them to rectify the situation ASAP, or face fines.
I had my own billing issues with them, which is why I am no longer a customer. Dealing with customer service on the phone is a joke, and if I remember, it was also offshored. Shameful for such a large company. They are one of the reasons I only use prepaid services now. No contracts, no BS.