Creditors reporting on your credit?

My question primarily is what are the rules surrounding creditors. Several years ago I was listed as a tenant on my father in-laws lease. My wife & I lived with him for about 1 month as a vacation away from home. Anyways, at the end of his lease agreement he packed up & left. The realty company turned me & him into collections for $1700. Now i've never had any dealings with these people, I don't even know how they got enough information on me to obtain my credit, all I gave was my name & perhaps dl number. I mean if this is the way the credit system works, then whats to stop some pissed off guy from opening up his own credit system & generating a credit hit list on his enemies?