Earlier quoted context omitted.
Yea, an arrest on your record, even if you're acquitted and/or get a settlement for police wrongdoing, can still mess you up. There are employers and landlords who will ask you / check whether you were ever arrested, regardless of the outcome of the arrest . Mere involvement with Law Enforcement puts a permanent black mark on your record and can interfere with basic things for the rest of your life.
Which is why I believe criminal records should only be kept for serious crimes (killing, etc.), anything less, the record gets deleted after few months completely. Otherwise, just as you said, the black mark on the records are worse than serving a whole year in prison, and can be used to exploit others.
One of the criteria: "The person has reached 120 years of age."
Cool.