Labour is calling for a change to EU law to crack down on tricksters who are exploiting legal grey areas to con small businesses out of thousands of pounds.

The problem centres on organisations that claim to be the publishers of business directories and offer small businesses what appears to be a free listing in their publication.

Weeks later those same businesses receive hefty bills for “administration fees”, followed up by threats of legal action if the bills aren’t paid.

The campaign to crack down on the practice has taken to the floor of the European Parliament, with MEPs calling for new rules that outlaw unfair and exploitative contract terms hidden in small print.

Labour’s Catherine Stihler MEP, spokesperson for Labour Euro-MPs on Consumer Affairs, explained: “Small businesses are being tricked out of thousands of pounds, and the most horrifying thing is that the European Commission can’t even tell us whether it is illegal or not.

“These are fly-by-night operations that simply shut down and reopen under another name as soon as there is a whiff of trouble. They open in one country before exploiting businesses in another, knowing that this makes it harder for the authorities to act.

“We need EU legislation that clearly says this is not allowed. It is obvious that these practices are unfair, so it is time for the law to catch up with common sense.”

The existence of the “administration charges” are hidden amongst acres of small print, and claims for the money usually come well after the cooling off period in which it is legally possible to cancel a contract of this nature.

However, Catherine Stihler is warning businesses not to be fooled into parting with their cash:

“While these activities do exist in a legal grey area, these tricksters make their money by scaring people into paying up with official looking legal letters. Yet I’m not aware of a single case that has actually made it to court.

“Clearly the best advice is to read all the small print on any free offers carefully before signing. However, anyone who thinks that they may have been victim of such a scam should seek advice before they even think of parting with any money.”

On Thursday the European Parliament approved a resolution calling for EU law to be revised to deal with the problem.