Friday. 02.06.2023

Government to compensate travelers for tour packages cancellations

Travelers would not be entitled to refund if they receive compensation based on another act or agreement, for example from a credit card company.

The Finnish Government is preparing a legal reform to increase protection for consumers in the event of cancellation of their tour packages due to the coronavirus crisis, which has led many tour operators to bankruptcy. 

A travel package is defined as a combination of at least two travel services purchased for a joint price for the same trip or holiday, most commonly transport and accommodation.

According to a press release by the Ministry of Economic Affairs and Employment, the Government submitted Thursday a proposal for a temporary amendment to the Act on Providers of Travel Service Combinations on 3 September 2020.

The government proposes that, in the event of a cancellation of a travel package, travelers would receive compensation from the State for the fees paid to the tour operator. Travelers could also be compensated for a travel voucher issued by the tour operator instead of a cash refund.

Normally, it is the tour operator’s obligation to refund the fees or the value of the travel voucher. The temporary act would apply to situations where the tour operator has been declared bankrupt and the cancellation of the travel package has been caused by the coronavirus epidemic.

The government aims to ensure an equal status of all consumers if a tour operator goes bankrupt. The refunding of trips cancelled as a result of the coronavirus epidemic and the travel vouchers issued as their alternative are currently not covered by insolvency protection, that is, in the form of a security. As a result, consumers whose travel packages have been cancelled because of the coronavirus epidemic have been in a different position compared with consumers whose trips have been cancelled as a direct consequence of the tour operator’s insolvency.

Right to get a refund

In a situation caused by the coronavirus epidemic, where the traveler or the tour operator has cancelled the travel package, the customer has the right to be fully refunded for the fees without undue delay and no later than within 14 days after the cancellation of the travel package.

The fees can be refunded in cash or, if the customer consents, in the form of a travel voucher.

The aim is to make the receipt of travel vouchers by consumers an equal alternative to a cash refund. The possibility of state compensation would reduce the risks incurred by the traveler for receiving a travel voucher. At the same time, more extensive use of travel vouchers may ease the financial challenges faced by tour operators.

The European Commission has recommended that the EU member states undertake measures to make travel vouchers more attractive.

Compensation from the State could only be granted for claims that cannot be refunded from the security provided by the tour operator. Travelers would not be entitled to compensation if they receive compensation based on another act or agreement, for example from a credit card company.

The Finnish Competition and Consumer Agency would decide on the payment of compensation.

The proposal is related to the 5th supplementary budget proposal for 2020, agreed on Thursday 3 September. A new variable appropriation of 2 million euros is proposed for this compensation related to the bankruptcy of tour operators, according to the Ministry of Finance.

The Act would remain in force until 31 December 2022.

Government to compensate travelers for tour packages cancellations