Labor Department is reportedly investigating Wells Fargo's 401(k) unit

Key Points
  • Wells Fargo's 401(k) practices are the subject of a probe by the U.S. Labor Department, The Wall Street Journal reported Thursday.
  • The investigation explores whether the bank is pushing its customers from lower-cost plans into more expensive IRAs, according to the report.
  • This would mark the latest headache for the bank, which is still recovering from a 2016 fake accounts scandal and paid a $1 billion fine over misconduct in its mortgage lending and auto businesses last week.
Labor Department is investigating Wells Fargo's 401(k) unit: WSJ

The U.S. Labor Department is reportedly looking into Wells Fargo's 401(k) practices, and whether the bank is pushing its customers into more expensive plans, The Wall Street Journal reported Thursday.

The department reportedly launched a probe into whether the bank is encouraging people to change from lower-cost 401(k) plans to more costly individual retirement accounts, the Journal said, citing a person familiar with the inquiry.

The investigation also explores whether the bank's retirement unit pushed customers to opt into funds managed by Wells Fargo, which would mean more revenue for the bank, according to the report.

Wells Fargo agrees to $1 billion settlement with Feds

Wells Fargo, in response to CNBC's request for comment, pointed to its latest quarterly regulatory filing.

"We are committed to thorough reviews of Wealth and Investment Management, per our 10-K disclosures, to their full conclusion," a Wells Fargo spokesperson said. "Our top priority is to rebuild trust with all of our stakeholders. The disclosures in the 10-K filing reflect our continued commitment to transparency, even when all of the information or the final outcome of a matter may not be known just yet. We are making significant progress in our work to identify and fix any issues, make things right, and build a better, stronger company."

The filing, which came out in March, disclosed a review of certain activities in the wealth and investment management business in response to inquiries from federal government agencies. The review included whether the division had made inappropriate referrals and recommendations for 401(k) participants.

This would mark the latest regulatory headache for the San Francisco-based bank. Last week, Wells Fargo agreed to pay a $1 billion fine over misconduct in its mortgage lending and auto businesses.

Shares of the bank fell more than 1.1 percent Thursday, and are down more than 13 percent this year.

The nation's third-largest bank has struggled to recover from a 2016 fake accounts scandal. Branch employees had opened millions of fake accounts in customers' names without their knowledge to meet sales targets.

Wells Fargo switched up its executive ranks following the scandal but other investigations into its own sales practices unearthed issues in its auto lending, mortgage and wealth management divisions.

This week, shareholders and protesters rallied outside of the company's annual meeting in Des Moines, Iowa. Last year's three-hour meeting in Florida was interrupted by protesters more than once.

In February, the Federal Reserve restricted Wells Fargo's loan growth until it makes several internal changes to its risk management.