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The posting of false information such as this is generally not considered criminal or blackmail. It may however constitute libel. The publication of a false statement to multiple parties.
If the other party chooses to publish a false statement, you can bring them to court to file for both actual damages (the cost of any loss in income due to the publication), and for punitive damages (money as compensation for their improper conduct).
They are asking for me to pay costs to them.
I understand, they are asking for a refund based on their claim that your residence was infested. You believe it was not (as confirmed by inspection). Publication of a false claim for a commercial rental transaction is generally not actionable for extortion claims (or alternatively, law enforcement is unable or unwilling to expend resources on these matters). Most blackmail statutes apply to individuals threatening other individuals.
If you choose to do so, you may report the matter to law enforcement in the jurisdiction where the incident occurred, or where the other party resides. To prove a case of extortion (blackmail), the prosecution must show that the defendant has attempted to force the other party to do something, or refrain from doing something, they are entitled to do, by threatening to do something that the defendant is not entitled to do.
So it is okay for then to threaten our home with bad reviews if I do not pay their costs?
Is this your personal home or a rental we are discussing?
So it is okay for them to threaten us with bad reviews of our home if I do not pay them?
It is a personal home that we rent when we are not there.
My understanding is that you have a rental residence that is being threatened with poor reviews in the event you do not change the billing for them. This is extortion in the general sense. Whether or not a law enforcement agency is willing to prosecute this type of extortion is based mostly on the availability of resources. This is a commercial transaction and not a personal one.
You will however have a strong case for libel in the event they do post the review, and you will be entitled to damages as I cited above. While this type of action can only come subsequent to any illicit posting, it does add substantial risk to the other party given the nature of their conduct.
Thanks for your time.
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