The new mandatory checks, supported by the Finance and Leasing Association, include an inspection of the customer’s driving licence by ultra-violet light to establish authenticity.

All consumers applying for car finance will have to produce a current cheque guarantee card, credit card or employer’s security pass incorporating a photograph.

Car dealers are being issued with UV lamps in advance of the checks coming into force.

Consumers failing to co-operate will be refused funding, the Financial Times reports.

Director-general of the FLA, Martin Hall, explained, “Motor finance fraud has become a huge issue in the UK and everyone except the fraudsters loses out.”

“Issuing UV lamps to the dealers shows we mean business.”

Around four million transactions involving vehicle finance take place each year and the FLA’s figures show that motor finance fraud rose by 6.1 per cent last year, with association members alone reporting about £15 million worth of fraudulent transactions.

Individual consumers, sole traders and smaller partnerships will be subject to the new regime; limited companies and larger partnerships will be exempt.

The move to check applications for car finance follows the introduction of new automated communications technology, which allows finance houses, insurance companies and consumers to check the authenticity and history of any vehicle via mobile phone.