What is pre-arbitration?
Firstly, you need to know that this definition comes closely with the notion of ‘chargeback.’ As the chargeback process commonly may have 4 stages, the pre-arbitration will be stage 3.
Stage 1. 1st presentment.
Stage 2. Chargeback.
Stage 3. Pre-arbitration.
Stage 4. Arbitration.
Pre-arbitration is a term from the card industry’s dispute resolution procedure which follows a chargeback submitted by one of the parties of a deal. The vendors, consumers, and financial organizations have the possibility to apply an arbitrator to resolve a dispute that is impossible to settle with the common chargeback procedure. The card network will analyze the evidence and come to the settlement of a certain case.
Basically, it’s another shot that the acquirer and the issuer take to solve the dispute.
The issuer has the power to issue a pre-arbitration if:
- a reason code has changed,
- a holder provided new data,
- terms and conditions weren’t accurately disclosed concurrently with the transaction.
During this time, the trader and the holder should fulfill all the demands for materials by the card distributor. If one of the parties refuses to collaborate, the refund will be given to the compliant side.
Nevertheless, when both sides fulfill the requirements, the card issuer will gather the proof to decide who will obtain the chargeback. As a result – the card issuer makes the decision.