Dear Terri,
I have a friend like that, but I am not going to say her name because she is a person who turns up on daytime TV from time to time being consulted about things - and she would sue me! Her problem was a degree of colour blindness. We all just thought she had frightful taste, but finally when asked to give an opinion on her newly-decorated flat, someone ventured to say that the combination of fuchsia, magenta, purple and shocking pink in one room was maybe a tad overpowering. Poor girl was amazed, she thought she had done all the decor in tasteful soft blues.
If that person hadn't been brave enough to speak, my friend would never have made it on to TV as her dress sense was along the same lines and she would have constituted a serious danger to the eyesight of the nation. She now gets someone to help with all colour-related purchases.
*btw the above is actually true*
Check that your friend actually knows the hotpants are lime green. Though if she is wearing hotpants at all, her taste is probably bad enough to wear anything.