I've used Hotels.com dozens of times and have never had to speak to anyone, shady agent or otherwise, to cancel. And I've also cancelled for free where "Free Cancellation" was mentioned as part of the fare rules.

You probably booked a VRBO accommodation; you have to be careful not to do that. Those really suck service wise. They might be nice and cheap but if something goes wrong, hotels.com isn't going to help you, while with the non-vrbo places they do. Places that are VRBO have a large VRBO logo next to them; they are not hotels.com bookings, just affiliates. Shitty, but I guess they found a way of making some more money.