On Aug 27th 2025, Braintree (owned by PayPal) introduced a policy that forces merchants to accept pre-arbitrations for disputes under $1,000:
https://developer.paypal.com/braintree/articles/risk-and-sec...
I’ve been a PayPal/Braintree merchant for over 10 years, and this feels like a pretty big shift in risk.
For anyone not deep into disputes:
- A customer files a chargeback.
- The merchant can submit evidence and may win that first round.
- The customer can then file a second dispute, which goes into pre-arbitration. The merchant can again submit evidence and, historically, sometimes win.
If either side pushes further, it goes to arbitration, where there’s usually a few-hundred-dollar fee for the losing side.
Under this new policy, for transactions under $1,000, Braintree will automatically accept the pre-arbitration in favor of the customer. There’s no second chance to present your side as the merchant; the dispute is simply closed and refunded to the cardholder.
Practically, this means:
- A customer can lose the first dispute,
- Immediately escalate,
- And automatically win the pre-arbitration if the transaction is under $1,000.
I’ve already had multiple cases where bad-faith customers was awarded the full amount at pre-arbitration solely because of this rule. At that point, the only remaining recourse is to pursue the customer directly (legal action, collections, etc.), which is usually not realistic for sub-$1k orders.
For anyone running ecommerce on Braintree, this effectively creates a “free second shot” at a dispute for customers under $1k, with the merchant guaranteed to lose the second round by policy.
Has anyone else run into this yet?
