refusal of 0 balance letter of judgement filed after 4 missed payment!

Have a client who paid off their last lender two weeks ago. Lender has refused to provide 0 balance letter or remove the judgment. They told the merchant you can only get the 0 balance letter and judgment address if they provide a completed app from them with 3 months bank.

is this legal to do and is this common place now? this would be the second merchant being blackmailed or held hostage to get capital elsewhere.