The Privacy Commissioner has criticised Orcon as "ignorant" after a decision against the internet provider saw thousands of dollars in damages awarded to a young soldier.
In a recently released judgement, the Human Rights Review Tribunal ordered Orcon to pay $25,000 to Brett James Taylor and train its staff about the company's privacy obligations.
Mr Taylor, a soldier, ordered a modem and broadband package from Orcon in early 2012.
When he was sent a useless modem, and was signed onto the wrong package, his bill was waived by an Orcon employee.
However, he was later billed for $138.90, and Orcon then instructed Baycorp to recover $208.58 he was accused of owing.
Baycorp eventually referred the disputed debt back to Orcon, and in October 2013, an Orcon employee finally acknowledged Mr Taylor had been billed incorrectly.
Until the dispute was resolved, Mr Taylor and his partner Chloe Tasker, who have a young daughter, found it almost impossible to rent a home and get credit. It also threatened his career in the army.
The bogus debt also damaged Mr Taylor's previously good relations with GE Money and he was denied credit.
Orcon said its policy was to investigate any complaint over charges before alerting Baycorp, but the tribunal was not persuaded.
"We observe this practice was not followed in Mr Taylor's case and no credible explanation has been given for this failure."
As no debt existed, the tribunal said Orcon provided Baycorp with "inaccurate and misleading personal information" in breach of the Privacy Act.
It awarded damages of $10,000 for the loss of a benefit and Orcon was also told to pay $15,000 for humiliation, loss of dignity and injury to feelings.
Privacy Commissioner John Edwards said the tribunal's decision meant that if there was a disputed debt, companies should not refer it to a debt collector unless the dispute was settled.
"If there is a debt in dispute, companies have a very high duty to check they are not in error because there can be profound consequences for the individual if they get it wrong.
"Here we had a soldier with a young family who was unable to gain rental accommodation as a result of this particular failure.
"There's simply no excuse for companies to be as ignorant of their basic obligations under the Privacy Act as Orcon was found to be."