In 2016 Wells Fargo was fined $185 million dollars by the Consumer Financial Protection Bureau for opening up two million fake accounts, that is accounts without their customers permission.

Q. How did they intend to profit from this as it seems that no new money was going into the system?


@Giskard: Unauthorised accounts are still a fake accounts, it's merely more specific about the nature of its 'fakeness'. I meant by new money as additional monies brought in by new custom. Your answer points out that Wells Fargo was making money through administrative charges as opposed to interest on a larger capital base. I'd have accepted your answer as correct but my phone isn't letting me click on accept - it's an old phone.

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    $\begingroup$ The top of Wells Fargo thought profits would increase if more genuine accounts were opened, both by new customers and by existing customers; they were not looking for fake accounts. To pursue this, middle managers and staff were set excessive targets to sell new accounts, using both carrots and sticks (bonuses and threats of dismissal) as incentives. In many cases they responded to these incentives by opening unauthorized accounts, to such a large extent that this was seen as a failure across the bank rather than by individual members of staff $\endgroup$ – Henry Dec 24 '18 at 13:14
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    $\begingroup$ @Henry Please post answers as answers. (In this case you will get downvoted by the OP for saying "unauthorized accounts" rather than "fake accounts", but still, it is the principle.) $\endgroup$ – Giskard Dec 24 '18 at 19:23

Why do you think no new money was going into the system?

The accounts where unauthorized rather than fake. Wells Fargo charged their existing customers for additional accounts that they did not request.

Wells Fargo clients began to notice the fraud after being charged unanticipated fees and receiving unexpected credit or debit cards or lines of credit.

Source: Wikipedia

  • $\begingroup$ Because there's a big difference between two million new customers and 2 million additional accounts opened up by existing customers. The fact that Wells Fargo was making money by charging customers for the new accounts shows that it wasn't due to additional capitalisation. Unauthorised and fake mean the same thing. $\endgroup$ – Mozibur Ullah Dec 23 '18 at 11:55
  • $\begingroup$ @MoziburUllah I have no clue what you are asking anymore. So the customers paying additional fees is not new money going into the system? $\endgroup$ – Giskard Dec 23 '18 at 12:09
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    $\begingroup$ @MoziburUllah if this doesn't answer your question, then your question isn't clear, and needs to be closed until you edit it to describe what it is you want to know. $\endgroup$ – 410 gone Dec 23 '18 at 12:44
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    $\begingroup$ So your question has been answered, then? I don't see what "additional capitalisation" has to do with anything. Do you think that this is something to do with expansion of the money supply, or something? $\endgroup$ – 410 gone Dec 23 '18 at 12:51
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    $\begingroup$ @MoziburUllah "unauthorised" and "fake" do not mean the same thing. Unauthorised accounts are new accounts made in the name of existing customers, and billed to them, as denesp says in their answer. Fake accounts aren't attached to anything. $\endgroup$ – 410 gone Dec 23 '18 at 13:03

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