The European Parliament has approved a Europe-wide ban on phone fraud companies that trick people into calling expensive numbers to claim non-existent prizes.

The Office of Fair Trading revealed last month that Britons are cheated out of at least £1 billion a year by the sham calls, and by rogue internet trading.

Diana Wallis, a Liberal Democrat MEP, said that the EU-wide ban will make it illegal to target consumers with misleading telephone calls or websites.

"These scams are a real headache. Not only are the calls an unwanted nuisance, they can also end up costing a lot of money for vulnerable and unsuspecting people," she said.

MEPs vote for the Unfair Commercial Practices Directive, designed to tighten consumer laws and outlaw phone scams anywhere in the EU.

The new rules will stop scammers basing themselves in one country while operating in another to avoid prosecution. They will allow national authorities to pursue offenders targeting their own consumers, even if the scammers are located in another country.

Ms Wallis, who helped steer the directive through the European Parliament, said that there was considerable concern at the escalating numbers of people receiving unwanted automated calls saying they have won a prize.

When they follow the instructions and call back, many do not realise that they are dialling a premium-rate number that can cost many pounds. All such numbers begin with 090.

Gerry Sutcliffe, the consumer affairs minister, said: "This new EU law will protect consumers across Europe from scam and dodgy traders who make false claims about their products, or treat consumers aggressively. It will also allow legitimate businesses to trade across borders more easily."

The dangers of calling an 090 number to collect a "prize" are highlighted by the case of Kathy Lennard, 54, who got a text message on her mobile saying she had won £1,450.

She called the collection number from her landline, but suspected a scam and hung up after just 40 seconds. The call should have cost just £1, but the fraudsters claimed it lasted for 18 hours 38 minutes and tried to charge Ms Lennard £1,677.

Kathy, of Folkestone, Kent, refused to pay and was locked in a 15-month dispute with BT, before they tore up the bill and offered £250 compensation. Ofcom fined service provider Countrywide Promotions of Cork, Ireland, £10,000 and banned it for 12 months.

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