Learn the domain· 10 min read

Lifecycle

A dispute is not a single event — it's a state machine with up to four formal stages, each carrying its own deadlines, fees, and decision rights. The headline number to remember: 30 days per phase for the merchant response, 120 days for the initial cardholder claim (Visa), and up to 100 days end-to-end from inquiry to a binding outcome.

Last reviewed against primary sources on .

The whole picture, in one diagram

Read top-down. Each arrow is a fixed-deadline transition. The terminal states (won, lost, arbitration-resolved) are where money finally settles.

Stage 0 — Inquiry / RFI (optional)
  Issuer asks merchant a question. Funds NOT moved.
  Merchant has ~7–30 days to respond.
                       │
                       ▼
Stage 1 — First chargeback
  Issuer formally disputes. Acquirer debits merchant.
  Merchant has 30 days to accept or represent.
                       │
            ┌──────────┴──────────┐
            ▼                     ▼
        accept                 represent
       (won by issuer)     (Stage 2 begins)
                                  │
                                  ▼
Stage 2 — Issuer review of representment
  Issuer accepts the evidence (→ merchant wins)
  …or upholds the chargeback (→ merchant lost)
  Either side may escalate within 30 days.
                                  │
                                  ▼
Stage 3 — Pre-arbitration
  Whichever side disagrees files pre-arb.
  The other side has 30 days to accept or reject.
                                  │
                                  ▼
Stage 4 — Arbitration
  Network rules on the case. Decision is binding.
  Losing side pays the disputed amount + filing fee.

Stage 0 — Inquiry / RFI

Visa calls this retrieval requests (now mostly deprecated); Mastercard calls them retrieval requests too, plus the lighter-weight Compliance Casefor fee/policy disputes. Most modern processors abstract these into "inquiry" or "RFI" (request-for-information) regardless of scheme.

The merchant gets a question — typically "please send the receipt" or "please explain this charge" — and the issuer holds off on raising a formal chargeback while waiting. No funds are moved. The merchant has roughly 7–30 days to respond depending on scheme and processor. A clean RFI response can prevent the dispute from escalating at all.

Stage 1 — First chargeback (Visa Claims Resolution)

Since April 2018, every Visa dispute flows through one of two Visa Claims Resolution (VCR) workflows. VCR consolidated the legacy 22 reason codes into four categories and routes each category through a different path:

Allocation workflow

Fraud · Authorization

Visa runs automated checks against its internal data before the merchant ever sees the case. If the network can determine liability (e.g. a CVV-verified, 3-D-Secure-authenticated transaction with no fraud markers), the dispute is automatically resolved in the merchant's favour at the allocation step. Only the survivors reach the merchant for response.

Allocation cases now resolve end-to-end in ~70 days total (down from 150 pre-VCR).

Collaboration workflow

Consumer disputes · Processing errors

These cases need merchant-supplied evidence by definition — the network can't adjudicate "the dress was the wrong colour" from authorization data. Both sides exchange evidence; Visa rules on the merits at the end.

Collaboration cases run ~100 days end-to-end.

Mastercard's equivalent system is called Mastercom. The terminology differs but the shape is the same — message-based, deadline-bounded, with the network adjudicating at the end.

Stage 1.5 — Merchant decision

On receiving a Stage 1 chargeback, the merchant has three options:

  • Accept— the chargeback stands; the funds are gone permanently. This is the right move when the cardholder is correct (e.g. genuine fraud you have no way to disprove) or when the case isn't economical to fight (small ticket size, no useful evidence). Accepting is not the same as ignoring — failure to respond is treated as accepting and can trigger penalties.
  • Represent — submit a response with evidence proving the charge was valid. The case moves to Stage 2; the issuer reviews. A well-built representment can recover the funds AND remove the dispute from your ratio, depending on outcome.
  • Partial accept (Mastercard only) — Mastercard allows a partial-credit acknowledgement for some reason categories. Visa is binary.

Stage 2 — Representment review

Once the merchant submits a representment with evidence, the case flows back to the issuer. In Collaboration, the issuer literally re-reviews; in Allocation, Visa runs additional automated adjudication. The outcomes:

  • Issuer accepts the representment — funds return to the merchant. The case is won. The chargeback still appears in your processor's history but typically does NOT count toward dispute-ratio programs.
  • Issuer upholds the chargeback — funds stay with the cardholder. The case is lost. The merchant has 30 days to escalate to pre-arbitration if they think the network would rule differently.

Stage 3 — Pre-arbitration

Pre-arbitration is the merchant's (or the issuer's) formal way of saying "I disagree with the Stage 2 outcome, and I'm willing to escalate." Filing pre-arb is deliberately not free — there's a small filing fee (~$15 on Mastercard) and a meaningful operational cost.

The other side has 30 days to either accept (the case is closed at the pre-arb level — whichever way the accepter chose) or reject, which moves the case to arbitration. In practice the majority of pre-arbs are accepted: filing pre-arb signals you're prepared to spend an arbitration filing fee, so the other side often folds.

Stage 4 — Arbitration

The endgame. Whichever side files arbitration is committing to paying a filing fee ($600 on Visa, $400 on Mastercard as of 2025; subject to scheme updates) plusthe disputed amount if they lose. The network reviews the case file and issues a binding decision. There's a separate appeal fee (Visa: $1,000) for genuinely exceptional cases.

Timeframes at a glance

DeadlineOwnerLength
Cardholder claim window (general)Cardholder120 days from transaction or expected delivery
Cardholder claim — services not receivedCardholderUp to 540 days from transaction date
Cardholder claim — authorizationCardholder75 days
Reg E billing-error notice (US debit)Cardholder60 days from statement
Bank investigation (Reg E)Issuer10 business days
Merchant response per phaseMerchant30 days
End-to-end (Allocation)All~70 days
End-to-end (Collaboration)All~100 days

Sources