I am happy to report that Shannon Paul called today and told me that they would be giving my money back to me plus the interest that was charged. Props to Shannon. She said I should see the credit on Monday, so I hope it actually takes place. I guess in the end they did the right thing. It is unfortunate that it had to come down to this to get them to do the right thing.
Side note: this highlights the disconnect that can happen in large organizations when they lose sight of the customer relationship and get caught up in rules and processes. Connect your customer service team with your marketing team and remove the silos when handling delicate customer issues. Kudos to Shannon Paul for using social media to listen to customers and her due diligence to investigate and resolve the situation promptly. Your service teams should be empowered to do the same.