Prior Refund: Applied to a high value order without our knowledge (in .com)

Hi, we are a small UK based seller who recently sent a high value order to a US buyer in .com. Long story short, it was unclear whether there was a product fault or not, and we were negotiating the returns process with the customer when we saw to our dismay that the full refund had been applied, showing Prior Refund: Applied. We have not applied this refund, so it must be an auto setting somewhere in the Amazon system. Does anyone know where this setting is, and if and how a seller can alter this setting so that we are not subject to such a large refund again without our prior consent?