Millions of pounds worth of parking fines are to be waived following a legal blunder by one of Scotland's largest councils.

Transport executives at Edinburgh council have admitted parking fines totalling around £6.5m have now been cancelled, as the tickets issued by wardens since 1998 were not legally binding.

Now executives at the council, which issues 250,000 parking tickets worth £7m each year, are bracing themselves for a potentially severe financial problem as they face up to the possibility of refunding millions of pounds worth of paid fines.

Yesterday, campaigners urged people to mount legal challenges to win back their cash, which has already been done successfully in England. It is unclear whether other Scottish councils might be open to challenges.

The legality of the tickets in Edinburgh first came into question in June as they did not bear both the date of issue and date of offence as required by UK law.

Tickets issued from June 2006 were amended in accordance with the law but it emerged yesterday that all debt owed prior to that date has now been wiped clean.

Sheriff officers are being told to stop chasing all outstanding offences dating back to decriminalisation in 1998, understood to total about 70,000. The council has also abandoned pursuing 4327 fines it had not yet passed to sheriff officers.

A spokesman for the council said: "We have taken external legal advice, which has forced us to write off a number of unpaid tickets issued before June 1 last year."

The more immediate issue for the council is what will happen if the law-abiding people who paid their fines demand their money back.

Councils in England have had to cancel outstanding tickets for the same reason, and one family in London has won back all the money paid out in fines after mounting a legal challenge.

Campbell Deane, of the Scottish legal firm Bannatyne Kirkwood France, believes the most likely scenario in Edinburgh would see the council choosing not to contest any claims - given the relatively low cost of a refund - although he thought many residents would be put off starting a legal fight over just £30.

Edinburgh parking executives do not believe motorists who paid their tickets are due any cash back because they have effectively accepted their guilt, although the legal position remains unclear.