Stephen Bitters, 38, was in Spain on holiday with his family when CCTV snapped his old Renault Clio driving in Maryhill Road, Glasgow.
Despite showing council bosses proof that he was out of the country and he had sold his four-year-old motor to a car dealership a month earlier, they have hounded him relentlessly.
They have even sent sheriff officers to Stephen's home and started taking money out of his bank account to pay court charges.
The Scottish Water engineer and dad-of-four, from Nitshill, said: "It is utter torture. I'm being treated like a criminal even though I've done nothing wrong.
"Glasgow City Council should be ashamed of themselves the way they have handled this, hounding an innocent man with sheriff officers at my home, warning letters and threats of court action.
"It's outrageous and they have even taken two payments of £25 out of my bank account without my permission for court charges.
"When I phone them now they refuse to speak to me and say it's in the hands of the sheriff officers so it looks like I'll end up in court.
"I'm angry and frustrated. I can't sleep for worrying about it and it has been really stressful."
His wife Anne-Marie, 41, took voluntary redundancy from her customer services job and the couple decided to buy a bigger family car and treat themselves to a holiday.
The couple traded in their old Clio at Arnold Clark and picked up a new Vauxhall Zafira on May 31 last year.
Stephen filled in the DVLA form straight away and got a letter back confirming he was no longer the owner of the Clio.
The family went to Benalmadena for a fortnight on June 18 but his old car was caught on CCTV driving in a bus lane on June 26 and there was a penalty notice for £60 in the mail when they arrived home on July 3 last year.
While Stephen has spent the past year disputing the fine, charges have now run up to £244.55 and he faces court action.
A council spokesman said: "The information provided to the council will be reviewed."
An spokeswoman for Arnold Clark said: "This is between the DVLA and Glasgow City Council.
"However, we will assist in any way we can."