Pre-arbitration

Pre-arbitration is a stage in the chargeback process that occurs after the issuing bank rejects the merchant's representment evidence. At this point, the merchant must decide whether to accept the chargeback or escalate the dispute to formal card network arbitration.

How it works

After a merchant submits evidence during representment, the issuing bank reviews the case. If the bank determines the evidence doesn't adequately refute the chargeback, they may initiate pre-arbitration. This gives both banks one final opportunity to negotiate a resolution before incurring the fees and binding decisions of formal arbitration.

When pre-arbitration occurs

The issuing bank typically initiates pre-arbitration when:

The merchant's evidence doesn't sufficiently address the dispute
The cardholder provides additional information that strengthens their claim
The original reason code needs to be updated based on new evidence
Transaction terms or policies weren't properly disclosed to the cardholder

Merchant decision

During pre-arbitration, merchants face a critical choice: accept the chargeback and associated fees, or proceed to arbitration. Arbitration involves additional fees (typically $500+) and results in a binding decision from the card network. Merchants should weigh the dispute amount against arbitration costs and their likelihood of winning.