John and Jen Palmer are fighting the mother of all negative credit report records. The couple has decided to file a lawsuit against online retailer KlearGear for violations of the Fair Credit Reporting Act.
The Palmer’s credit rating took a big hit when a $3500 debt showed up on their credit report. The debt itself had nothing to do with a $20 purchase that the couple made in December 2008. That item had been paid for at the time of the purchase. Due to what the couple complained was “horrible customer service practices,” the couple decided to complain by placing a negative review on the popular site RipOffReport.com.
With the couple did not know is that KlearGear had placed a clause in his terms of use on the website that banned customers from making negative comments about the company on any public forum. This is known as a non-disparagement clause.
In response to the negative review, KlearGear demanded that he couple pay a fine of $3500 as a penalty for violating the non-disparagement clause. The couple was provided a choice to either remove the negative content or to pay the fine. Ironically the Palmers say KlearGear failed to respond to the arbitration process of RipOffReport which was necessary to remove the negative review.
The couple tried to have the negative records removed from your credit bureau reports, claiming that the debts were invalid. Now the Palmers claimed that KlearGear is demanding another $50 be paid as a dispute fee. Due to the unprecedented action taken by the online retailer, Public Citizen has filed a lawsuit against KlearGear on the half of the Palmers. The lawsuit claims that the non-disparagement clause was absent from the terms of use of the website at the time of the order in 2008. Furthermore the lawsuit is demanding $75,000 be paid in compensation for violations of the Fair Credit Reporting Act.
The couple story was recently featured on ABC news.com as a worst-case scenario of online purchasing. In a statement John Palmer said “KlearGear’s unscrupulous conduct has affected every aspect of our lives, from major financial transactions like financing a new home purchase and a car purchase, to basic needs like heat in our home.”
[UPDATE March 1, 2014: The Palmers have announced through their attorney that they have released Fidelity Information Corp. from the lawsuit after the debt collector removed the erroneous debt from the Palmers credit records. KlearGear still has been unresponsive to the Palmers case however and still faces legal action brought by the Palmers.]
Until the lawsuit is completed or settled, it is too early to say if KlearGear violated federal law. At a minimum the company has won an onslaught of negative publicity. Debtors Unite will continue to follow this case which shows just how fragile a credit rating can be.
Long is a graduate of the University of North Carolina at Chapel Hill with a B.A. in Industrial Relations. He subsequently received his Certificate in Nonprofit Management from Duke University. His Certificate in Financial Planning was issued by Florida State University.
Long has achieved the Accredited Credit Counselor and Accredited Financial Counselor certifications through the Association for Financial Counseling, Planning and Education. Long originally achieved the Certified Credit Counselor designation through the National Institute for Financial Education.
In addition to years of nonprofit leadership, Long has been an innovator in the field of volunteer tax return preparation programs. He assists volunteer associations and nonprofit organizations who seek to integrate credit counseling and asset-building programs with free personal income tax preparation. His approach to using free credit reports as both an incentive and a screening tool for placement into asset-building programs has been shared with members of the National Community Tax Coalition, the EITC-Carolinas Initiative of MDC, Inc. and nonprofit groups across the Carolinas.
Long assists members of our armed forces in the Carolinas, Iowa, Rhode Island, Georgia and Germany with financial readiness. Please support our Soldiers, Marines, Airmen and Sailors!
Favorite quote:
"The democracy will cease to exist when you take away from those who are willing to work and give to those who would not."
Thomas Jefferson
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