Pre-Arbitration

Pre-arbitration is a crucial step within the chargeback process, allowing the merchant to determine whether to accept responsibility for the chargeback or escalate the case to card network arbitration. It occurs after the merchant has already provided evidence against the chargeback claim during the representment phase. If the dispute remains unresolved, pre-arbitration follows. Unlike arbitration, pre-arbitration does not involve the card networks in making a final decision. Instead, it provides the acquirer and issuer with another opportunity to reach a resolution. First Data states that pre-arbitration reviews the chargeback case based on the “merit of reasonableness,” questioning the initial reasonableness of the chargeback claim.

Pre-arbitration may be initiated by the issuer for several reasons, including:

• Reason Code Change: If there is a change in the reason code associated with the chargeback, it may trigger pre-arbitration.
• New Information: If the cardholder provides additional information relevant to the dispute during the chargeback process, the issuer may opt for pre-arbitration.
• Dispute Evidence Evaluation: The issuer may believe that the evidence provided by the acquirer in response to the chargeback claim does not effectively refute the dispute.
• Inadequate Disclosure: Pre-arbitration may occur if the terms and conditions and return policies were not properly disclosed to the cardholder during the transaction.