Columbia House DVD Club Charged me for items I never recieved and sent account to collections. Indianapolis , Indiana

I got an offer of buy 12 for 1 cent and then buy 10 more within year.  I bought many but was later told that most didn't count as part of the requirements due to sales or whatever.  I was then charged $103 that I ordered for a christmas present but never recieved.  I tried to deal with it but they were rude.  They said that I owed that amount regardless to fullfill my contract.  I said I was NOT paying for something I never recieved.  They said I had to prepay and then they would ship the movies.  I said I was NOT paying for something I haven't received especially when they already tried to charge me for things I didn't recieve.  They have sent the account to collections and it is affecting my credit.  The only negative report on my credit and affects applying for a job/student loans ect.  I tried to file a report with the credit reporting agency and they did nothing.  I don't know what else to do.  This is ridiculous and illegal - ISN"T IT???