Pre-Arbitration Process Explained

What is pre-arbitration? How does pre-arbitration affect the chargeback process? And what does the pre-arbitration process look like? This blog will explain how pre-arbitration works, when it’s used, and how pre-arbitration into the larger picture of the chargeback procedure. For starters, pre-arbitration is a step in the re-presentment process of challenging a consumer’s chargeback case. While this may seem foreign to the average consumer, anyone who has previously challenged a charge on a credit card has likely participated in the chargeback procedure or in pre-arbitration dispute resolution. Understanding the pre-arbitration and the represented process will help consumers and merchants figure out how to navigate disputes and authorization issues. Keep reading to learn more about what pre-arbitration means, how it works, and how pre-arbitration affects you.

Steps of the Chargeback Arbitration Process

The arbitration chargeback process protects consumers from unauthorized charges on their credit cards. When a consumer or cardholder disagrees with a charge on a credit card, they file a dispute, which is known as the first “chargeback” or initial chargeback. The cardholder’s bank will then follow through on the pre-arbitration with the outlined process:

  1. Transaction: This step refers to when the initial transaction is placed on the cardholder’s account.
  2. Chargeback: When the cardholder or issuer disputes the charge from the merchant, this is the original chargeback or initial dispute. A merchant may accept liability and the chargeback procedure may end here.
  3. Representment: The merchant “re-presents” the charge to the card and provides evidence that the transaction was valid. The issuing bank reviews whether it is legitimate.
  4. Pre-Arbitration: For this step, the card issuer does not accept the merchant’s evidence or the cardholder’s initial evidence, and the losing party must present more compelling evidence to be considered. This is referred to as a second chargeback.
  5. Arbitration Case: This is the last step that only happens when both parties cannot agree at any point in the pre-arbitration process. Here, the card networks will make a final decision on whether the transaction is legitimate or not.

Because there are a number of steps involved, the best way to thoroughly explain the process from the original chargeback to pre-arbitration is to use an example. Cindy has a credit card from an issuer named Go Card. She regularly uses her card at a flower shop on her block owned by Mary. As a doctor in the pediatrics wing of a local hospital, Cindy often buys multiple arrangements from Mary to send to patients and families. One day, Cindy is checking her statement and notices a $450 charge from Mary’s flower shop on a day that Cindy is out of town. Cindy believes this charge is incorrect in the first place, so she contacts Go Card and tells them that she would like to begin the dispute process and the arbitration chargeback. Keep reading to see how each step of the pre-arbitration chargeback plays out in this circumstance.

The Transaction

When a transaction is placed, the cardholder’s bank statement will reflect the charge. However, the question in the arbitration chargeback case is whether the transaction is legitimate or not. When a charge is added to a card, this is referred to as “presenting the charge” to the card. In our example above, the transaction would be the $450 charge from Mary’s flower shop that Cindy found. What makes the original chargeback transaction questionable is the fact that Cindy was out of town.


The chargeback pre-arbitration occurs when a cardholder files a dispute with the issuing bank. Depending on the bank, a cardholder may have anywhere from one and a half months to six months after a transaction to file a chargeback dispute or start the arbitration case filing. The bank will then review the report to determine whether the dispute is valid or not. After the bank reviews the dispute, if they determine that the dispute is valid, they will send the claim to the merchant’s bank which will send a notification to the merchant. This notice will include details about the dispute and state that the cardholder’s bank has received funds from the merchant’s bank to refund the transaction and fees to cover the investigation. It will usually include forms that a merchant can fill out to challenge the chargeback. If the dispute is challenged, it becomes a pre-arbitration case and the process for pre-arbitration case filing begins.

In the example above, a pre-arbitration chargeback would occur when Cindy contacts Go Card and disputes the charge. Go Card will then review the dispute for validity. Because Cindy regularly buys flowers from Mary, she has to provide evidence that she was out of town that day. She submitted a receipt from the hotel that she was at and the gas she bought from a station in the next state. Go Card believes that Cindy was not in town that day and sends the claim to Mary’s bank, Merchant Cards. Merchant Cards reviews the documents and places a debit on Mary’s account for the $450 charge and the fees incurred during the investigation. Merchant Cards also sends Mary information about how to challenge the dispute and gives her 10 days to do so.


Once a merchant has received notice, they can either accept liability and the credit, or they can challenge the disputed charge in an attempt to get the original issuer to represent the charge to the consumer’s account. The merchant needs to submit detailed evidence that the charge was for a legitimate transaction and that the transaction was fulfilled. This evidence can be documentation of shipping, receipts, proof of delivery, or proof of conversations. Once the merchant’s bank receives this documentation, it is forwarded to the cardholder’s bank. The merchant’s bank will then give the merchant a temporary credit for the amount. The bank will then review the evidence to see if the transaction was fulfilled. If the bank decides that the merchant has not provided adequate evidence, they decide in favor of the cardholder and allow the credit to the cardholder to stand. If the issuing bank finds that the merchant has provided enough evidence to refute the chargeback, they will decide for the merchant and let the credit on the merchant’s account stand.

When applied to our example, Mary will receive the notice of the dispute and check her records. She finds a receipt for the transaction which shows a variety of arrangements to be shipped to the hospital’s pediatric wing and a confirmation that it’s for the hospital where Cindy works. Mary looks for more new information, but because the deadline is so fast, she decides to only send this receipt as proof. Mary takes the receipt and sends it to Merchant Cards. Merchant Cards sends the information to Go Card for evaluation. Go Card looks at the receipt from Mary and the delivery confirmation. They decided that Mary completed the transaction accordingly. So, they give Mary the money and send Cindy an explanation of the decision.


In most pre-arbitration cases, once the issuing bank decides, the cardholder or merchant may challenge the charge for a second time, provided there is new evidence that would support a closer examination of the charge. This is what a pre-arbitration is and is also referred to as a second chargeback. When a second chargeback happens, the bank alerts the merchant’s bank and notifies the merchant. The merchant has a second chance to accept the chargeback or dispute it. To contest it, the merchant must provide more compelling evidence that the transaction was completed. Once the merchant submits the evidence to their bank, the merchant’s bank sends it to the bank, reviewing it a second time with more evidence. The same options are available to the issuing bank. If the bank decides the merchant has provided sufficient evidence to refute the cardholder’s new evidence, they keep the charge on the cardholder’s account and the cardholder will accept liability. But if the evidence does not refute the chargeback evidence, the charge remains on the merchant’s account and they will accept liability.

Cindy still believes that the charge on her account is incorrect. She sends her bank evidence that she only orders arrangements in person because she likes to see the arrangements that she is ordering and match them to the patients she is sending them. She also submits proof that she was not the physician for one-third of the patients who received flowers. As an arbitration chargeback response, Cindy provides a series of receipts from Mary’s Flower Shop to prove that she usually spends $250 to $300, so $450 is an abnormally high amount. Go Bank reviews this new information and decides that it is enough to refute Mary’s evidence and sides with the initial chargeback.

Once Mary receives this new evidence and the new second chargeback notice, Mary checks her records again. Mary would like to challenge the second callback, so she is hoping to find new, compelling evidence that this order was valid. While looking at her orders from the days surrounding the order in question, Mary finds a receipt for Cindy’s previous purchase. Along with the order for that day, Mary’s notes on the order included an underlined note that said, “Repeat similar order next week. Dr. Hans will pick it up. Charge anything he would like on my card to thank him.” Mary sends proof of this to Merchant Cards. Merchant Cards sends the evidence to Go Card, who decides that this evidence seems to refute Cindy’s evidence. When Cindy sees the note, she remembers that she had arranged the order and accepts the charge.


For those pre-arbitration cases where either party or the merchant’s bank is unhappy with the final decision in chargeback pre-arbitration, they can ask the card network to arbitrate the dispute. This usually adds quite a bit more money and time to the dispute process. So, many banks and parties choose to avoid arbitration unless the dispute is over thousands of dollars. Each bank has a different pre-arbitration or dispute process, but it usually includes the card network’s review of the evidence. The pre-arbitration panel then issues a final decision, and the losing party takes on the charge or accepts liability.

If Cindy decided that she still thought the charge was not authorized, she could ask the card network to arbitrate. However, because the charge was only $450, the visa arbitration fee would be more expensive than the charge, and Cindy probably would not have a good case. If she lost, she would have to pay the arbitration fees, and the charge on her account would stand. So, she would probably choose not to arbitrate, even if she felt like the decision was wrong. Reaching an arbitration agreement between the involved parties can be a lengthy process. And the consumer is oftentimes the losing party.


Pre-arbitration is a vital process to examine and dispute charges for transactions on cards. The pre-arbitration phase can be drawn out, but it can be incredibly helpful for consumers who have an unauthorized charge on their card or can help merchants confirm that they charged a consumer correctly. The process brings clarity and helps the involved parties see the full picture. It also allows these disputes to stay out of court and avoid any pre-arbitration or arbitration chargeback fees associated with litigation. Understanding what a pre-arbitration chargeback is will help a participant know how to navigate the process when a chargeback occurs and how to best defend their view. Hopefully, this article will help readers prepare for pre-arbitration and understand the arbitration process as they move through such cases.

Frequently Asked Questions

What does representing mean?

When a credit cardholder disputes a charge with their credit company, this is known as a chargeback. The credit company will then investigate the dispute and make a decision on who is responsible for the charge. The credit company will “re-present” the chargeback to the merchant. This means that the credit company will work with the merchant to try to get the chargeback reversed using a second presentment.

How does pre-arbitration work?

It’s a process that is used to settle disputes before they go to court. The involved parties submit their claims to a third party who will then review the claims and determine if a decision can be made. If not, the case can be eligible for arbitration.

What is arbitration chargeback?

Arbitration chargebacks are a form of credit card chargeback that is available to merchants who have a valid arbitration agreement with their credit card processor. This arbitration chargeback is used to dispute transactions that were made as a result of a fraudulent or unauthorized purchase.

How long does a merchant have to respond to a pre-arbitration case?

Merchants have a set time limit to respond to a pre-arbitration case. This time limit is generally around 20 days, but it can vary depending on the case. If the merchant does not respond within this time frame, the pre-arbitration case will likely be ruled in the customer’s favor and the pre-arbitration chargeback will be finalized.

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