Trying to purchase home and 7 year old debt is in collection

Have been reading your web page and you include some really great advice, but i do still have one question. My husband and i are trying to purchase a home and there is a collection in my file hurting our chances and making our score low. The thing is i have no idea who they are. They are called Portfolio Recovery and they say i owe $63.00. Not much right?? Well when i called they said i owed $2,000. When i asked who the original creditor was they said Capital One and it was an account opened in 1998 and last act shown was 2000. Can they do this?? This is 7 years old. I dont even remember this account honestly but i can say that right after high school and attending college this may have been a credit card i let go. But it would be so difficult trying to obtain records 7 years ago. What advice can you give me to get this taken off my credit report file? I want to dispute it but maybe you can give me some key points when doing so.
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use debt validation
then the follow up if needed
then contact your state attorney general
if they cannot give you full details with legal documents showing you owe this money and they a legally able to collect it from you.