Definition and purpose of security
In case of insolvency, a travel service combination provider must lodge a security when it charges passengers, either in part or full, for the price of a journey before the start of the trip. The provider of the travel service combination is responsible for ensuring that the security it provides is sufficient at any given time.
A travel service combination provider which charges advance payments from passengers for travel packages or linked travel arrangements, must lodge a security to enable the refund of payments for agreed services that are not provided in the event of insolvency. If the agreement includes carriage of passengers, the security must also cover repatriation of travellers.
The security shall be used only for the payment of secured claims to travellers and, where required, repatriation of travellers. The traveller cannot, therefore, claim from the security, e.g. regarding a price reduction or a claim for damages, if the provider of the travel service combination is not declared bankrupt or is not declared insolvent by a decision of the Finnish Competition and Consumer Authority. However, in the event of insolvency, the passenger has the right to recover the money they have paid, even if the services provided by subcontractors as part of the travel package have been paid. This right applies to the entire travel package contract and also, for example, to air tickets or hotel vouchers already in a customer's possession.
The amount of the security must be sufficient, at all times, to compensate for the above refunds in the event of the insolvency of the travel service combination provider. In the event of and interrupted trip, the consumer will be paid compensation equivalent to the portion of the trip that was interrupted. Advance payments collected by a service combination provider shall at no time exceed the amount of the security.
The security is based on the aggregate amount of advance payments collected before travel commences. Pre-paid fees include both booking fees and the final payments made before departure, as well as unredeemed gift vouchers entitling the holder to the purchase of travel service combinations. A large booking fee and long payment terms raise the amount of guarantee required. The monthly sales figures used as the basis for calculation (booked sales) must always be expressed in gross amounts and reflect the total value of the journey, even if part of the price is paid after the journey.
If the combination includes transport, a security covering possible repatriation of travellers must also be added. However, the repatriation obligation does not apply to connecting transport, such as a shuttle bus from an airport to accommodation.
Moreover, no security is required for journeys falling outside the scope of the Act and purchased on the basis of a general agreement for the arrangement of business travel. The general agreement referred to in this provision is an agreement concluded between a trader and a corporate customer acting for purposes related to their business, trade, craft or profession. Such an agreement is generally concluded with the travel organiser for an indefinite or certain period and concerns several journeys made as part of the business or other organisation's activities.
What does reduction of security mean?
Pursuant to the Act on Travel Service Combination Providers, a financially sound tour operator may apply for reduced security, which means that the company may operate with a lower security than it computationally should. The Finnish Competition and Consumer Authority uses the information submitted to assess the amount of reduction, if any. Reduced security can be granted to a trader whose risk of insolvency is deemed low. The security is reduced by the amount by which the trader’s equity exceeds the security imposed on it. The reduced security must, however, be at least 50% of the approved security amount.
Computational security 75,000
In this case, the possible reduction of security would be 25,000 i.e., 100,000 - 75,000 = 25,000; the reduced security amount is the difference between the equity and the computational security, not automatically half of the computational security
Computational security 40,000
In this case, the possible security reduction would be 20,000 i.e., 100,000 - 40,000 = 60,000; the reduction of security can be at most 50% of the computational security, whereby the security reduction is 40,000 * 50% = 20,000
Terms for reducing the computational security:
- the equity exceeds the amount of the computational security
- the security is reduced by the amount by which the trader’s equity exceeds the security imposed on it
- the value of the current assets and financial assets pursuant to the financial statements has, during the current and the preceding two financial periods, at least equalled the short-term liabilities pursuant to the financial statements
- the trader has not, during the past five accounting periods, repeatedly or considerably neglected its obligations related to taxes, statutory pension, accident insurance and unemployment insurance premiums or fees collected by the Customs
- the reduced security must, however, be at least 50% of the approved security amount
- a certified auditor’s signature is required for all applicants regardless of whether they are obliged to statutory audits
The Finnish Competition and Consumer Authority recommends that the application for reduced security is submitted no later than a month prior to the commencement of the next security period. However, a reduced security can be applied for at any time of the year or guarantee period, as long as the reports required by law are delivered to the Finnish Competition and Consumer Authority.
Fill in form E, confirmed by a certified auditor
The application shall include financial statements for the current year and two preceding years
Send the signed application to the Finnish Competition and Consumer Authority
The notification shall be sent by either post or e-mail.
Finnish Competition and Consumer Authority
PO Box 5
Lodging a security and further actions
The application processing time is between two and six weeks. You can expedite the processing by ensuring that the requisite information and appendices are included with the application. When the Finnish Competition and Consumer Authority has received the application for reduced guarantee, you will be contacted about the amount of security reduction, if any.
After receipt of the security deposit decision, the trader arranges the security with the financial institution of its choice; the security templates approved by the FCCA and required for the lodging of the security can be found via the link below.
The annual supervision fee is determined according to the greatest computational guarantee amount of the party obliged to pay the guarantee in the year preceding the year of payment.
Traders with reduced security report on their activities to the Finnish Competition and Consumer Authority twice a year using form F confirmed by a certified auditor. The Finnish Competition and Consumer Authority must remove a reduction of security if the trader neglects its reporting obligation or no longer meets the conditions for reducing the security.
Instructions on how to place a guarantee in accordance with the Act on travel service combination providers
Sections 7–8 of the Act on Travel Service Combination Providers (921/2017)
Section 3 of the Act on the Supervisory and Insolvency Protection Fee Provided by Providers of Travel Service Combinations (922/2017)