In payments and risk operations, winning a chargeback reversal is typically viewed as a successful outcome—an indication that the evidence was strong, the transaction was legitimate, and the representment process worked as intended. Yet a reversal doesn’t always conclude the dispute. In some cases, the issuer or cardholder may challenge the outcome, introducing new information or reevaluating the circumstances of the transaction. When this happens, the dispute can advance into pre-arbitration, a stage that often requires a more nuanced and strategic response than the initial representment.
Pre-arbitration is a complex juncture in the chargeback lifecycle because the conditions under which a dispute is reopened can vary significantly. The issuer may present recently obtained details, reinterpret the original reason code, or question aspects of the documentation that previously seemed sufficient. Card network rules also influence how and when pre-arbitration is triggered, and these rules are not always uniform. As a result, merchants must be prepared to reassess the case from multiple angles rather than relying solely on the rationale that supported the initial reversal.
What makes pre-arbitration particularly challenging is its impact beyond any single dispute. It introduces additional costs, operational considerations, and potential financial risk. Decisions made during this stage—whether to accept liability or escalate—can affect dispute ratios, internal workloads, and the likelihood of entering arbitration, where the stakes and fees increase substantially. Clear processes, accurate data, and well-defined thresholds for escalation become essential for managing exposure and maintaining consistent dispute performance.
Understanding how pre-arbitration works, when it occurs, and how to respond can make the difference between containing a dispute and watching it spiral into costly arbitration. In this guide, we’ll break down the mechanics of Visa’s pre-arbitration process, explain why these cases are uniquely challenging, and offer insights that help merchants make informed, financially sound decisions when disputes escalate beyond the initial chargeback stage.
The law ensured that if an unscrupulous merchant wanted to cheat customers out of their money by charging their credit card more than the agreed transaction amount or charging further transactions that weren't authorized, customers had a way to get their money back. It was also designed to protect customers whose cards were lost or stolen, ensuring that they wouldn't be liable for potentially thousands of dollars of purchases charged to their card by a thief.
While the Fair Credit Billing Act established the existence of chargebacks, working out how the process should work was left to banks and card networks, which is why the chargeback process tends to vary from one network to the next. Pre-arbitration is one example of this.
Sometimes, however, the final decision in a chargeback case may not sit well with the losing party. In that case, they may choose to file for arbitration.
Arbitration is typically considered the last resort for both parties, since the losing party will have to pay hundreds of dollars in fees. Most transactions simply aren't large enough to be worth the risk. Before a Visa chargeback reaches arbitration, however, there is pre-arbitration: One last chance for the parties involved to come to an agreement.
Pre-arbitration, sometimes known as pre-arb, occurs when a cardholder disputes a transaction for a second time with new information or evidence after the chargeback is reversed.
There are various reasons why issuers might bring a claim to pre-arbitration (or an analogous process with another card network). They might learn new information from the cardholder that causes them to change the reason code or interpret the transaction details in a new light or discover that the merchant did not disclose pertinent terms and conditions when the transaction took place.
In chargeback cases related to authorization errors or fraud, Visa will automatically analyze the transaction data and assign liability for the chargeback to either the issuing bank or the merchant, essentially automating the part of the process where the issuing bank would normally review evidence submitted by the merchant.
Because of this, any further dispute of these chargebacks is technically defined by Visa as the merchant initiating pre-arbitration. However, from the merchant's perspective, this version of pre-arbitration feels more like representment, since the issuer hasn't yet made a decision on the case.
Regardless of the cause, when the issuer sends a dispute back to the merchant in pre-arbitration, the merchant only has two options: accept liability for the chargeback or continue contesting it into arbitration. Unfortunately, it's often correct for merchants to accept liability even if they're sure the transaction was legitimate.
The idea behind pre-arbitration is that the cardholder may have new or unknown information regarding the transaction that proves their case of fraud. This information is outside the scope of the original chargeback, and even though the cardholder lost the initial chargeback, this new evidence gives the cardholder the opportunity to push for a second round of the process.
Although the ruling fell in favor of the merchant the first time, the merchant rarely wins on a second reversal.
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.
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.
So while every merchant knows that they need to keep all receipts and 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.
If you have delivery confirmation that includes a signature or a photo, this will often be your most compelling evidence against claims of non-delivery. It's not foolproof, of course. The package may have been signed for by another member of the household or the signature may be illegible. A photo might not show enough to prove the package was delivered to the correct address. In most cases, however, banks will view this additional confirmation of delivery as extremely compelling evidence.
Under the rules of Visa Claims Resolution, disputes proceed through an “allocation” workflow for disputes related to fraud and authorization issues, while merchant and processing error disputes go through a “collaboration” workflow. Pre-arbitration works slightly differently in each of these two workflows.
The allocation workflow is rules-based, which means that Visa will automatically render a decision on the dispute and merchants have only 30 days and certain conditions under which they can challenge the decision.
This is considered the pre-arbitration phase under allocation, even though it’s the merchant’s first opportunity to represent the charge.
Under the collaboration workflow, the merchant can submit evidence in representment once they receive notification of the dispute. If the issuer declines the representment, pre-arbitration is the next phase in the process, in which the acquirer can choose either to give up on fighting the dispute or request arbitration from the card network. The collaboration workflow closely resembles Mastercard’s process for all chargebacks.
When you get to the point of having to decide whether to keep fighting through pre-arbitration, it’s worth making a realistic assessment of your chances of winning. 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.
You should also keep in mind that arbitration fees are costly. It's often best for merchants to accept a second reversal rather than going through the arbitration process. The losing side in arbitration must pay a fee of several hundred dollars. For the sake of your business and your bottom line, try to only take on second reversals you are confident you can win.
Dealing with pre-arbitration can be a complicated and difficult process, and it can be hard to know which chargebacks to challenge and which to accept. This is where hiring professionals can be a helpful solution.
In addition to creating custom dispute packages that give you a better chance of winning disputes in the first place, the best chargeback management companies will provide you with in-depth data about the chargebacks that went to pre-arbitration and what the result was.
This data can be used to analyze the ROI of these cases and determine whether the merchant is contesting too many pre-arbitrations or too few. In one recent case, Chargeback Gurus analyzed dispute data from a company that felt they were handling pre-arbitration cases very effectively, winning the majority of disputes in arbitration. However, a closer look at the data showed that the company was actually losing revenue on these cases overall, since the fees from a single loss wiped out the gains from many wins.
That's why Chargeback Gurus uses purpose-build AI models to analyze the winnability of each case, only contesting pre-arbitration chargebacks that are likely to generate a positive ROI. Through a combination of expertise and technology, CBG helps merchants win more disputes and reduce revenue losses.