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Can Car Insurance Company Suspend My Drivers License?

Back in September of 2011 I got into a small fender bender and backed into a girl at a walmart parking lot. There was very small damage and we said we would take care of it because we did not want it to go on our insurance. So we wrote up an agreement that we would pay her this much for the damages and nothing more and both parties signed it. But now I am receiving letters from a collection agency who was hired by her insurance company saying I owe them 1600 dollars for the damages I caused and if I do not pay they will suspend my drivers licence. So I was just wondering if this was possible if they could actually do this and if there is any way yall can help me.

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