The Tale of Pre-Compliance, Compliance, and Good Faith

Backspace Tech
3 min read5 days ago

The Asgardian Gatekeeper Council convened and Heimdall plopped on the couch all worn out.

Thor: Heimdall, can you hear us?

Heimdall: I can hear and see everything, Thor!

Thor: Then why the long face?

Heimdall: Chargebacks have been flowing through the Bifrost and now pre-compliance/compliance wormholes are opening up everywhere in the realm.

Loki: Do you think Bifrost is the only way in and out of this realm for payment disputes? There are many other ways too!

Heimdall: Oh alright! What do we do then?

Loki: Whatever you’re doing, brother, for this stop I suggest you do it faster.

Thor: Don’t worry, I am calling for UDM

Heimdall: Oh, hold on! Before we get into war, what the heck is the wormhole all about?

Loki: Ah, it’s story time brother!

Thor: Get ready for the story, Heimdall!

Pre-Compliance and Compliance are entirely a different pathway that emerges in the case of the following events:

  • When a network’s core rules both product and service are in violation
  • The payment dispute does not fit any of the predefined reason codes
  • There has been a direct impact of financial loss because of this dispute
  • The financial loss could have been avoided if the rule was explicitly followed

And even after significant peace-keeping efforts, this stage could further progress to Compliance, if the pre-compliance stage does not witness amicable resolution.

The timeline for filing Compliance is T+90 days (about 3 months) from the day you identified the violation or from the transaction.

Pre-Compliance

So, as I said before, a Pre-compliance dispute is initiated by the issuer/acquirer when a dispute they encounter doesn’t meet any of the rules set forth by the card network. While it is a common myth that Pre-compliance is what follows a chargeback decision, I assure you it is not, and it comes before the compliance part.

The timeline for pre-compliance is 30 days from the date of transaction/rule violation. Meaning, in the span of 90 days, the first 30 are allotted for pre-compliance.

Heimdall: So, what does the network do in cases of pre-compliance?

Loki: Well, they act as mailmen delivering the mail to the intended party, that’s all!

While the majority of card networks have only set forth conditions that define this situation, RuPay is the only network that has reason codes for Compliance disputes ranging from 3501–3516.

In most cases, the payment dispute is often resolved in the pre-compliance stage as it is also known as the stage of compromise. But, if that does not happen, Compliance follows.

Compliance

Compliance comes with huge fee components like review fees, and filing fees in addition to dispute amounts that have been called into question. So, the party who wants to challenge the pre-compliance decision will accrue the filing fee cost and in case they win, the cost of review along with the disputed amount liability will be shifted to the losing party and vice versa.

Heimdall: So, the network still plays the role of mailman, is it?

Thor: Well, here the card network is the All-Father, enough said!

Loki: So, the decision they take, becomes all binding with no appeal or arguments!

Good faith

Now, Good faith can be almost likened to Convergence where all nine realms come together! It is a very rare event that is completely based on the will of the opposite party.

The timeline for the good faith response from the opposite party is actually a year (365 days) but our home-grown network RuPay has this timeline curbed to 30 days.

Heimdall: But why does good faith happen?

Thor: It is a very rare case that is not bound by any of the timelines specified by the network core rules and the reason for it could range anywhere from medical to negligence.

And for your information, Good faith is a completely different pathway and independent of pre-compliance/compliance disputes.

Heimdall: Alright Thor, got the picture! Let’s get ready for the war!

Armed with UDM, Thor, Loki, and Heimdall took every kind of dispute right from chargeback to good faith head on and peace reigned in the nine realms forever!

Get in touch with us today to know more about UDM and how it can help you regulate, tailor, and modernize your dispute process and responses.

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Backspace Tech

Backspace Tech offers Fintech-as-a-Service to automate,simplify, and disrupt the payment industry by handling chargeback requests through a plug-and-play model.