Couple Fined $3,500 For Negative Review Fights Back With Lawsuit

A Utah couple is suing an online merchant that fined them $3,500 for writing a negative review and sparked a financial nightmare for more than a year by reporting the alleged debt to credit rating companies.

Jen and John Palmer filed a lawsuit today against KlearGear.com in a Utah federal court, charging that the company violated the Fair Credit Reporting Act, defamation, intentional infliction of emotional distress and other actions.

"In sum, KlearGear attempted to punish a dissatisfied customer for his wife's criticism of KlearGear, then abused the credit reporting system in an attempt to extort money that the customer did not owe and could not possibly have owed," the Palmers' lawsuit states.

The story goes back to December 2008 when KlearGear.com didn't deliver Jen Palmer's online Christmas order of a desk ornament and keychain that cost less than $20. Jen Palmer, now 40, wrote a negative review on private business review site RipoffReport.com, saying KlearGear.com had "horrible customer service practices."

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Last summer, her husband, a senior network engineer, received an email from KlearGear.com demanding $3,500 pursuant to a non-disparagement clause that it claimed was in its "Terms of Use" on its website.

The Palmers say they asked RipOffReport to take down the negative review, but the site has an arbitration process that requires the involvement of the business. The couple say they shared this information with KlearGear.com, but the company didn't respond.

The Palmers refused to pay the fine, prompting KlearGear.com to report their "debt" to one or more credit reporting agencies, the suit claims. When the Palmers disputed the debt with several credit reporting agencies, KlearGear.com continued to maintain that the debt be paid and then demanded a $50 "dispute fee" because they attempted to dispute the debt, the couple claims.

KlearGear.com did not respond to a request for comment.

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The Palmers said the mark on their credit history affects their ability to obtain loans, most recently for a financing plan for a new furnace. As a result, in October, the couple and their 3-year-old son were without heat for three weeks until they saved the $1,900 to buy a furnace, the told ABCNews.com.

"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," John Palmer said in a statement. "For weeks, we bundled our son in blankets every night just to keep him warm in his own bedroom. We are fighting not only to clear my credit record and obtain compensation for our ordeal but also to make sure that no one else has to go through what we did."

Besides the debt to KlearGear.com, Palmer said she and her husband have maintained a good credit history.

After the Palmers took their story to a local television station, the nonprofit advocacy group Public Citizen volunteered to represent the couple, sending a letter last month to KlearGear.com, threatening to file a lawsuit against the e-commerce site unless it fixed the situation with a deadline of Dec. 16.

In the letter by Scott Michelman, staff attorney with Public Citizen who is representing the Palmers, the Palmers demanded that KlearGear.com inform the three major credit reporting agencies that their debt was in error, to compensate the Palmers $75,000 and not to include its "non-disparagement clause" going forward.

Michelman also said that the "non-disparagement" clause was not even on the website when John Palmer placed his order in 2008.

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