Pre-Arbitration Overview – August 4, 2016

What is a Pre-Arbitration and CB3? Pre-Arbitration applies to Visa and Discover. CB3 applies to MasterCard. Amex does not have Pre-Arbitration process. Pre-Arbitration: The issuer or cardholder continues to dispute the transaction, or the issuing bank is not satisfied with the merchant’s rebuttal submitted with the 1st chargeback, and would like to see more evidence. For Visa Pre-Arb, the issuer has 30 calendar days from receipt of the merchant’s rebuttal to file Pre-Arb, and 60 calendar days from receipt of the merchant’s rebuttal to straight file Arbitration. For Discover, the issuer has 30 calendar days from the close of a representment to file pre-arb (i.e. Pre-Arbitration Inquiry), and 30 calendar days from the notice date of a pre-arbitration to file arbitration (i.e. Dispute Arbitration). Once Intuit notifies the merchant of the Pre-Arb or CB3, the merchant will determine if they want to: 1. Accept the case, close it in the cardholder’s favor and no filing fees apply. 2. Respond and pursue Arbitration with potential filing fees of $500.00 (Visa) to $520.00 (MasterCard) if they lose. (If the merchant wins, no fees apply and funds are released.) Please note: Fees are not assessed for Discover pre-arb. Notices for Discover Pre-Arb are identical to the ones for Visa Pre-Arb, but there is no mention of fees. If the merchant signed the consent form agreeing to the potential filling fees and responds to the Pre-Arb, the issuer will review the merchant’s updated response and decide if they want to: 1. Accept it and close the case. FYI- Issuer does not notify Intuit when they close a case. 2. File against the case and have the Visa/MasterCard Arbitration Committee review the case and make a decision based on the documentation provided by both parties. Intuit or the issuer has no say in the Committee’s decision. 3. If the merchant does not respond by the due date on the letter, the case will be automatically closed in the cardholder’s favor. In some cases the Pre-Arb representative may decide to send a No Recourse letter up-front to the merchant instead of giving the option to pursue Arbitration. For CB3, the only difference is that Intuit initiates the Pre-Arb and files Arbitration if the issuer does not accept or respond to the merchant’s rebuttal. The issuer has 45 calendar days from receipt of the merchant’s rebuttal to file a CB3. Intuit has 45 calendar days from the CB3 to file Arbitration against the issuer. There is not a set timeframe for Visa, Discover and MasterCard to rule on a case. It can take months for a ruling to be determined.

Most common reasons for Pre-Arbs and CB3 Cardholder reviewed the merchant’s rebuttal on a fraud chargeback and still maintains that they did not authorize the charge. The merchant did not provide sufficient documentation to disprove the cardholder’s claim. The merchant did not provide proof that the merchandise or services were received. For service ‘not as described or defective merchandise’, the cardholder has now provided an updated letter with a 2nd opinion from another merchant, or the merchant did not address the cardholder’s dispute. The merchant did not provide a return policy or terms and conditions that were properly disclosed and acknowledged by the cardholder.

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