Visa's Chargeback Pre-Arbitration Process
Pre-arbitration is not a standard part of dealing with chargebacks, but rather a distinct procedure typically only applicable to Visa cards. Centered on a second chargeback or second reversal of a disputed transaction, pre-arbitration is a formal procedure to clarify whose claim has standing.
What is Pre-Arbitration?
Although the ruling fell in favor of the merchant the first time, the merchant almost never wins on a second reversal. While new and compelling evidence can potentially aid a merchant, it can be difficult to muster new information for an old case.
The first thing you should do when facing pre-arbitration is review the evidence presented in the original chargeback case. What kind of documentation do you have supporting the claim that the charge in question was legitimate? Establish this baseline information and then check your records to see if you have any other information. Any new information should be submitted to the dispute.
Assess the evidence (formal and informal)
It’s important to note that not just any evidence will do if you plan to get a second chargeback resolved in your favor. Evidence stems from a clear documentation process on the part of the merchant, and this includes both informal and formal documentation.
Note date and content of any phone conversations. It can bolster your claim.
So while every merchant knows that they need to keep all receipts, and while most keep at least recent email exchanges on file, additional forms of documentation can be of value. For example, have you spoken to the customer on the phone? Make note of any and all of these exchanges with dates, times, and discussion content. Alone, this may not constitute compelling evidence, but as an additional component, it can bolster your claim.
More convincing evidence might include delivery tracking information, including confirmation of receipt by the delivery company. If you did not include this information in your original chargeback claim, now is the time to add it to the mix. Be careful, though. Make sure to match this delivery information, particularly the address, with the billing information linked to the client. Also take a look at the signature. While packages are often signed for by someone else, and while a signature may be forged or illegible, a signature that matches the buyer information can support your claim as a merchant.
Consider alternatives to pre-arbitration
If you are facing a second reversal with a customer who is not a Visa cardholder, then the process will be different from what happens in pre-arbitration. MasterCard, for example, upon a second reversal, will handle the issue in the same fashion as a first reversal. The only difference is that for second chargebacks tied to MasterCard transactions, you will not be debited a processing fee. With Visa, you will pay a chargeback fee of $15 on pre-arbitration disputes whether you win or lose.
Pre-arbitration can only occur with MasterCard transactions if you’re able to submit additional evidence supporting the validity of the claim. This is relatively uncommon, as merchants often don’t have additional compelling evidence in relation to a claim that has already been disputed once. However, in cases where merchants have a significant amount of information about a transaction, they may only use some of it in the first chargeback phase. These merchants have an advantage if the charge is reversed a second time, but few are lucky enough to find themselves in this position.
The losing side in any MasterCard arbitration is debited the $400 filing fee.
Beware of the filing fees associated with MasterCard pre-arbitration. It is often best for merchants to accept a second reversal rather than going through a second arbitration process. The losing side in any MasterCard arbitration is debited the $400 filing fee. For the sake of your business and your bottom line, beware taking on second reversals you are confident you can win.
How pros help merchants beat pre-arbitration
Whether you’re a new merchant or an experienced hand, dealing with pre-arbitration can be a hassle you don’t need. This is where hiring professionals can be a helpful solution.
Some merchants think that it’s worth the risk to go without professionals. After all, for what it will cost to hire chargeback professionals to manage a pre-arbitration case, couldn’t you just swallow the expenses and move on?
Yes and no. When it comes to chargebacks, avoiding hassle and near-term costs aren't the only issues. This is also about protecting your reputation and improving your processes.
If you bring in chargeback professionals when you’re facing your first transaction reversals, they can help you to establish protocols that will prevent future reversals. You may lose your first few pre-arbitration rulings, but you will save your reputation with both customers and credit companies if you approach these cases with care.