More than three million people are in line for compensation after the banking industry abandoned its legal battle over the mis-selling of payment protection insurance.
The move is expected to cost firms between £7 billion and £9 billion, making the controversial product the biggest ever mis-selling scandal in the UK.
But consumers are likely to have to wait some time before they receive their money, due to the massive volume of complaints that banks and other groups which sold the cover must handle.
"This is a wonderful day for consumers," said Martin Lewis, creator of website MoneySavingExpert.com, which has long campaigned on the issue. "For once the banks have done the right thing and backed down. As much as £9 billion that was wrongly taken could now be paid back."
The level of their exposure became clearer, after the British Bankers' Association announced it would not be appealing against a High Court challenge it lost over new Financial Services Authority rules on PPI mis-selling being applied retrospectively.
Lloyds Banking Group said last week that it was pulling out of any further legal action and setting aside £3.2 billion to compensate customers. It was joined by Barclays, which expects claims to cost £1 billion, while HSBC, which stopped selling the policies in 2007, has made a provision of 440 million US dollars (£269 million).
Taxpayer-backed Royal Bank of Scotland also confirmed that it would not be pursuing further legal action, although it has yet to put a figure on how much compensation it is likely to have to pay out. Unofficial estimates based on the group's market share put the figure at around £1 billion. A number of other banks are also likely to face significant bills, as will stand-alone credit card and loan providers and some insurers.
The Financial Services Authority welcomed the BBA's decision.
A spokesman said on Monday: "Banks must now get on with handling all PPI complaints and paying redress where appropriate - the FSA stands ready to work with them on the practical implications of this.
"Today signals the end of years of poor PPI complaint handling and will trigger a dramatic improvement in the way customers are treated when making complaints."