A swoop on taxis and private hire vehicles working in Skipton revealed 80 per cent of them had defects.
The operation, spearheaded by the Benefits Agency, also led to five drivers being suspected of involvement in benefit fraud.
It was the first operation of its kind in the town run by the Government's Agency Intelligence Network.
Similar operations are expected in the Bradford and Keighley areas.
Twenty cabs were stopped and examined. Four vehicles had such serious defects - including tyres, lights and steering faults - they were immediately ordered off the road.
Three others also had potentially serious defects and the drivers were warned to repair the cars within ten days or have them removed from service.
Another nine were found to have minor defects and one cab was issued with a fixed penalty ticket for having two defective tyres.
The operation involved officers from the Benefits Agency, Customs and Excise, the Vehicle Inspectorate, Craven District Council and North Yorkshire Police.
Traffic Sergeant John Lumbard said: "Seventeen of the 20 vehicles stopped had defects.
"In addition, five drivers are being investigated for possible benefit fraud.
"The results are disappointing and show a lack of responsibility by people providing a public service."
A Benefits Agency spokesman said it was the first operation of its kind in Skipton and an investigation had started into alleged benefit fraud by five drivers which could lead to prosecution.
A Vehicle Inspectorate spokesman said the operation had been called for by the Benefits Agency and a number of spot checks would be carried out in other areas including Bradford.
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