Travel organiser’s security

A travel organiser must in most cases provide a security in order to sell travel packages. The security is used to refund to passengers the price of the travel packages if the organiser goes bankrupt.

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 consumer must usually pay the price of a travel package, or part of it, long before the travel package starts, which is why purchasing a package always involves a financial risk.

Under the EU travel package directive, the organiser must refund all payments to the traveller without undue delay if the organiser goes bankrupt.

The consumer’s right to a refund applies to the entire travel package contract. The consumer also has the right to be refunded for services provided by subcontractors, including flights or hotel vouchers for which the customer has paid to the organiser.

The security is only used to refund the consumer for fees paid before the start of the travel package and to arrange repatriation.

Consumers cannot claim a refund from the security for services they have already used during the trip. Repatriation is only arranged if linked travel arrangements include transport.

How large should the security be?

The amount of advance payments charged by the travel organiser before the start of the travel must never exceed the amount of the security.

Advance payments include

  • booking fees
  • final payments made before the start of the travel
  • unredeemed gift vouchers entitling the holder to purchase travel service combinations.

The security must cover all advance payments made by travellers.

If the travel package includes transport, a security amount that covers repatriation is also required.

If the organiser goes bankrupt during the performance of a travel package, the security will provide for the traveller:

  • refund of the price corresponding to the interrupted part of the trip.
  • repatriation if necessary.

When planning travel packages, the organiser should note that a large booking fee and long payment periods increase the total amount of advance payments and thus also the amount of the security required of the organiser.

The monthly sales figures used as the basis for calculation (booked sales) must always be reported in gross amounts to the Finnish Competition and Consumer Authority, and they must reflect the total value of the trip, even if part of the price were paid 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.
  • 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.

All applicants must have their application signed by an auditor, regardless of whether they are subject to the statutory audit obligation.

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