A disputes resolution expert says the $25,000 penalty handed down to Orcon this week should be a wake-up call to other New Zealand companies.
The Human Rights Review Tribunal ordered Orcon to pay army soldier Brett James Taylor and train staff about the company's privacy obligations.
Mr Taylor spent years battling a bogus debt Orcon referred to debt collectors.
Disputes resolution specialist Alan Knowsley, partner at Rainey Collins lawyers, said the Tribunal decision was significant, especially considering the training order made.
"For other companies, getting advice and providing training to staff and providing guidelines as to how the Privacy Act operates, and their obligations, would be one way of avoiding these sorts of issues."
Mr Knowsley said consumers wrongly lumped with debts could approach the Disputes Tribunal for an order proving they did not owe money.
Mr Knowsley said most companies should have internal dispute resolution services and point these out to customers.
"It doesn't sound like anything like that happened here. And in fact when Mr Taylor rang up, he was sort of laughed at by the call centre and not taken seriously," he said.
"Orcon investigated this eventually and found there was nothing owing. If they'd done that investigation at the beginning, they would have saved themselves $25,000, plus a lot of legal costs, plus a lot of bad publicity."
Mr Taylor said he and his partner Chloe Tasker, who have a young daughter, found it almost impossible to rent a home and get credit after Orcon referred the "debt" to debt collectors.
He told the Tribunal a bad credit rating also affected his chances of promotion in the Army.
Orcon's owners CallPlus apologised after the Privacy Commissioner and the Tribunal excoriated Orcon for its handling of Mr Taylor's case.
Mike Shirley, Orcon general manager, said the firm now recognised "the treatment of Mr Taylor was subpar" and several errors were made.
Mr Shirley said Orcon had since introduced new measures to ensure disputes were handled properly.
The Tribunal awarded damages of $10,000 to Mr Taylor for the loss of a benefit after gearing of his trouble finding rental accommodation.
In relation to a privacy breach when the firm shared some of Mr Taylor's details with Baycorp, Orcon was told to pay $15,000.
Asked if poor credit ratings thwarted career prospects for soldiers, a Defence Force spokeswoman said situations were treated individually.
"However, once the issue of bad credit has come to light, the serviceperson is assisted in planning a financial solution to remedy it for the purpose of their own welfare and the reputation of the service."