I'm seeing the exact opposite! I have my collapse folders enabled and they are acting as if collapse folders is disabled. I contacted Marketo Support about this and they couldn't figure out how to fix it (I cleared my cache, reset my browser to its original defaults, they cleared a couple caches on the back end for me, etc.).
My case was escalated, but this was the response I received:
Collapse folders is a treasure chest feature, so it is not part of mainstream release and is not fully supported, so we cannot continue troubleshooting this issue for you. Some things you might try are opening Marketo with any browser extensions disabled, or removing and reawarding your user roles. This option will likely be mainstreamed in an upcoming release, at which point we will actively work on bug fixes for it.