Travel organiser’s security

Legal notice

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The Finnish Competition and Consumer Authority makes its decision on the security an organiser must provide based on such factors as the figures on estimated and actual revenue submitted by the organiser as well as the terms of payment.

The organiser must deposit the security with the Finnish Competition and Consumer Authority before they can start marketing travel packages.

The vendor of the travel package is responsible for ensuring that the security is sufficient.

In which cases is a security required?

An organiser must provide a security as insolvency protection in the following situations:

• Travellers are charged the full price of the trip or a part of it before the start of the travel.
• The travel time is over 24 hours or the package includes an overnight stay.
• The trip includes at least two types of the following tourist services:
  • Transport
  • Accommodation
  • Vehicle rental
  • Other tourist service

PLEASE NOTE! A tourist service provider that facilitates the procurement of linked travel arrangements must provide a security for the part of the service they provide. If this service is transport, the security must also cover the costs of repatriation. Read more about linked travel arrangements

Why is a security needed?

The price of a travel package, or part of it, is usually paid well in advance of departure. Purchasing a trip therefore always involves a financial risk.

Under the legislation on package travel, travellers are entitled to a full refund of all payments made, without undue delay, if the travel organiser becomes insolvent and the trip cannot be carried out as a result.

Insolvency protection also covers services included in a travel package that are provided by subcontractors, such as flight tickets and hotel accommodation. Travellers are entitled to a refund for travel services they have not used. This also applies if the services remain available despite the travel organiser’s insolvency.

What does the security cover?

The security is used to refund payments made by travellers if a trip is cancelled due to the travel organiser’s insolvency. If a trip is interrupted due to insolvency, the security covers the cost of the part of the trip that has not been completed. No refunds are provided for travel services that have already been used.

If the travel package includes passenger transport, the security also covers the costs of repatriation and any necessary accommodation while awaiting repatriation.

The security can only be used in the event of the travel organiser’s insolvency. It does not cover refunds arising from the cancellation of a trip for reasons other than insolvency.

How is the amount of the security determined?

The amount of the security is based on estimates of future sales of travel packages and linked travel arrangements, and payments collected from travellers. The security must be sufficient to cover travellers’ advance payments and all other eligible costs at all times.

The amount of the security depends on

• the number of travellers,
• the prices of the trips,
• and the amounts and timing of booking fees and final payments.

Unredeemed gift vouchers entitling the holder to purchase travel service combinations are also taken into account. The earlier booking fees and final payments are collected, the greater the total amount of payments that may need to be covered by the security at the same time.

The number and timing of trips also affect the amount of the security:

• If trips are organised infrequently, payments for different trips may be spread over different periods.
• If trips are organised frequently, payments for several trips may overlap, increasing the amount of security required.
• On the other hand, when trips are organised regularly, the amount of payments that need to be covered by the security decreases as payments for completed trips no longer need to be covered.

The key factor in determining the amount of the security is the maximum combined amount of payments and costs that must be covered at any one time. Large booking fees and final payments collected well in advance of departure may therefore increase the amount of security required.

Monitoring the security and reporting sales figures

Travel organisers must monitor the adequacy of their security and notify the Finnish Competition and Consumer Authority (FCCA) without delay of any changes that may affect the amount of security required. If the payments and costs to be covered by the security are at risk of exceeding the amount of security provided, the organiser must contact the FCCA regarding an increase in the security.

The monthly sales figures used to calculate the amount of the security must be reported to the FCCA in gross amounts. The full value of each trip must be reported, even if part of the price is collected after the trip.

How can I arrange a security?

The organiser must arrange the required security with a financial institution. Financial institutions include banks, insurance companies and financial companies specialising in guarantees.

In practice, there are two ways of providing a security:

• Guarantee: A guarantee is a counter security that the financial institution collects from the organiser. The factors affecting the costs of the guarantee include the solvency and assets of the guarantee holder.
  or
• Pledge agreement: A pledge agreement refers to a bank deposit in an escrow account in which the pledgee is the Finnish Competition and Consumer Authority. The pledge agreement is drawn up by a financial institution.

The financial institution sends the original guarantee or pledge agreement to the FCCA, which keeps it for the duration of its validity.

Obligations of the travel organiser providing a security

Travel organisers entered in the Travel Guarantee Register are charged an annual supervision fee, which is determined on the basis of the largest computational security amount in the calendar year preceding the year of payment.

• When an organiser registers for the first time, the supervision fee is determined based on the highest security amount in the year of registration.
• The travel organiser must immediately notify the FCCA of any changes that essentially affect the scope of its operation.
• In good time before a valid security expires, the organiser must submit the information necessary for re-assessing the security amount using the FCCA’s reporting forms. We recommend that organisers use the FCCA’s Valma system for reporting.

If an organiser is entitled to reduced security, they must report on their operation to the Finnish Competition and Consumer Authority twice a year using Form F signed by an auditor.

The FCCA must cancel the reduction of security if the organiser neglects their reporting obligation or no longer meets the criteria for reduced security.

Reduced security

A financially sound travel organiser may apply for reduced security.
Reduced security means that a smaller security than the amount based on a computational assessment is accepted.

The amount of the reduced security is determined by the Finnish Competition and Consumer Authority. Reduced security can be granted to an organiser whose risk of insolvency is deemed low.

The security is reduced by the amount by which the organiser’s equity exceeds the security imposed on them. However, the reduced security must be at least 50% of the approved security amount.

Example 1: 
Equity 100,000
Computational security 75,000
In this case, the possible reduction of security would be 25,000,
or 100,000 – 75,000 = 25,000. The reduced security amount is the difference between the equity and the computational security, not automatically one half of the computational security.

Example 2: 
Equity 100,000
Computational security 40,000
In this case, the possible reduction of security would be 20,000,
or 100,000 – 40,000 = 60,000. The reduction of security can be at most 50% of the computational security, in which case the security reduction is 40,000 * 50% = 20,000.

Criteria for reducing the computational security

The organiser’s equity exceeds the amount of the computational security.

The security can be reduced by the amount by which the organiser’s equity exceeds the security imposed on it.

In the organiser’s financial statements, the value of their current assets and financial assets has, during the current and the preceding two financial years, at least equalled the short-term liabilities.

The organiser has not, during the past five accounting periods, repeatedly or considerably neglected their obligations related to taxes, statutory pension, accident insurance and unemployment insurance premiums or fees collected by the Customs

The reduced security must be at least 50% of the approved security amount.

Applying for reduced security

The Finnish Competition and Consumer Authority recommends that the organisers submit their applications no later than one month before the next security period begins.

However, an organiser can apply for reduced security at any time, as long as the reports required by law are submitted to the Finnish Competition and Consumer Authority.

This is how you apply for reduced security:

1. Fill in application for reduction of security (form E)
2. Attach to your application financial statements for the current year and two preceding years.
3. Submit the signed application to the FCCA either by post or e-mail.Finnish Competition and Consumer Authority
   P.O. Box 5
   00531 Helsinki
   E-mail: [email protected]