What is Pre-arbitration Chargeback? A Merchant Guide

Many Merchants may not be familiar with the intricacies of Pre-arbitration Chargeback, an important element of doing business in the digital space. 

Put simply, it is a process where a customer disputes a charge and contacts their financial institution to request a refund which kicks off an investigation that either fails or succeeds and results in a chargeback being issued or denied. 

It's of utmost importance for merchants to understand Pre-arbitration Chargebacks because they can be costly if not handled correctly. This merchant guide outlines the essential steps required to ensure success during the pre-arbitration process.

Pre-Arbitration Chargeback Process

What triggers a Pre-Arbitration Chargeback?

Pre-Arbitration Chargeback occurs when a cardholder disputes a transaction and the issuing bank requests additional information from the merchant to support their claim. A Pre-Arbitration Chargeback is triggered after the initial chargeback process has already been initiated, and the cardholder has not received a satisfactory resolution.

The reasons for a Pre-Arbitration Chargeback may vary, but common triggers include cases where the cardholder believes that the goods or services provided were not as described, or the merchant did not deliver what they promised. It may also happen in instances where the transaction was unauthorized, or there were errors in the transaction amount.

Issuing bank's role in Pre-Arbitration Chargeback

The issuing bank plays a critical role in the Pre-Arbitration Chargeback process. Once the cardholder files a dispute, the issuing bank investigates the claim and gathers additional information to support the chargeback. If the issuing bank finds that the cardholder's claim is valid, they may initiate a Pre-Arbitration Chargeback, which requires the merchant to provide additional information to dispute the claim.

The issuing bank may also request that the merchant provides supporting documentation, such as transaction receipts, delivery confirmations, or service agreements, to prove that the transaction was valid. If the merchant fails to provide sufficient evidence to refute the chargeback claim, the issuing bank may rule in favor of the cardholder and issue a chargeback reversal.

Merchant's response to Pre-Arbitration Chargeback

Once a merchant receives a Pre-Arbitration Chargeback, they have a limited timeframe to respond to the claim. The merchant should carefully review the chargeback reason and gather all relevant information to support their dispute. This may include transaction receipts, shipping records, or any other evidence that can help to prove that the transaction was valid.

The merchant should then submit their response to the issuing bank, along with any supporting documentation, within the specified timeframe. If the merchant can provide sufficient evidence to refute the chargeback claim, the issuing bank may rule in their favor and reverse the chargeback.

Timeframe for Pre-Arbitration Chargeback resolution

The timeframe for Pre-Arbitration Chargeback resolution varies depending on the card network rules and regulations. Generally, the merchant has between 10 and 45 days to respond to the chargeback claim, depending on the network.

Strategies to Avoid Pre-Arbitration Chargeback

Strategies for handling disputes before they escalate to Pre-Arbitration Chargeback

Handling disputes before they escalate to Pre-Arbitration Chargebacks is essential to maintaining good relationships with customers and avoiding chargebacks. Some strategies for handling disputes include:

• Providing customers with clear communication channels for addressing concerns or complaints, such as email, phone, or live chat
• Offering refunds or exchanges when appropriate
• Responding promptly to all customer inquiries and concerns
• Resolving disputes in a timely and professional manner
• Keeping detailed records of all customer interactions and transactions

Importance of customer service in reducing chargebacks

Providing excellent customer service is crucial to reducing chargebacks. Customers are more likely to file chargebacks when they feel ignored, dissatisfied, or misled. By providing top-notch customer service, merchants can build strong relationships with customers and reduce the likelihood of chargebacks. Some tips for providing excellent customer service include:

• Responding promptly to all customer inquiries and concerns
• Listening carefully to customer complaints and addressing them professionally and empathetically
• Offering refunds or exchanges when appropriate
• Providing clear and accurate product descriptions and pricing information
• Ensuring that all billing and shipping information is accurate and up to date
• Staying in touch with customers after a transaction to ensure that they are satisfied with their purchase and to address any issues that may arise

Preparing for Pre-Arbitration Chargeback

When responding to a Pre-Arbitration Chargeback, it is important for merchants to have the necessary documentation to build a strong case. Some required documentation may include:

• Proof of delivery or service completion
• Transaction receipts or invoices
• Communication with the customer, such as emails or phone logs
• Any refund or return policies that were provided to the customer
• Any terms and conditions that apply to the transaction
• Any other documentation that supports the merchant's position

Importance of maintaining accurate transaction records

Maintaining accurate transaction records is essential for preparing for a Pre-Arbitration Chargeback. Accurate records can help merchants quickly and efficiently respond to chargeback and build a strong case. Some benefits of maintaining accurate transaction records include:

• The ability to quickly identify and locate transaction information when responding to a chargeback
• The ability to easily verify the accuracy of transaction information, such as billing and shipping addresses
• The ability to identify any potential errors or inconsistencies in the transaction information
• The ability to provide clear and accurate documentation to support the merchant's position in a dispute

Strategies for building a strong case

Building a strong case is essential for successfully defending against a Pre-Arbitration Chargeback. Some strategies for building a strong case include:

• Gathering all relevant documentation, such as transaction receipts, delivery confirmation, and communication with the customer
• Reviewing all documentation for accuracy and consistency
• Identifying any potential errors or inconsistencies in the customer's claim
• Preparing a detailed and persuasive response to the chargeback that addresses each point of the customer's claim
• Providing clear and accurate documentation to support the merchant's position
• Using language that is professional and respectful when communicating with the customer and the issuing bank

Utilize Chargeback To Prevent Chargeback at First Place

Preventing chargebacks in the first place is key to shining success in the retail sphere. With Chargeflow, merchants have the capacity to manage chargeback and disputes with ease. Our automated solutions offer a variety of features that not only help with existing chargeback attempts but ensure secure transactions and dispute resolution moving forward. 

To lessen the strain of manual processes within businesses, merchants can take advantage of our comprehensive tools that take the load off while eliminating potential losses through better prevention methods. Utilize Chargeflow to keep your business' chargeback rate low and your profits high.