What to do next depends upon what you are seeking.
They have offered a settlement for less than the full debt. If you accept, you will eliminate any chance of future legal action (assuming the debt is still within SOL), and improve your CR upon manual review by showing satisfaction of the debt. You save money by not paying the entire debt. That may be important to a future creditor. And, of course, you save money by not paying the entire debt, and "do the right thing."
On the negative side, lack of CR deletion will continue to include the collection in your scoring. Additionally, settling for less will permit them to post an additional special comment in your credit report notifying others that you did not fully satisfy the prior debt. That alone is a negative in a manual review.
What you can do? You could, if so inclined, argue their statement that deletion is "against the FCRA," since it is not. However, a PFD offer is a type of GW request, and I doubt that arguing the correctness of their reason will foster much good-will. It is contrary to their credit reporting agreement with the CRA to delete on the basis of payment, but whatever their reason is, it is their decision.
Personally, I would make them an offer to pay at the 50% agreed level, but with the additional condition that they not report a special comment of "paid for less."
