Banking giant Wells Fargo & Co. is closing its 638 subprime lending offices that operated nationwide to supply higher-cost mortgages, auto loans and credit cards in lower-income neighborhoods.

About 3,800 employees will lose their jobs as the company shutters its Wells Fargo Financial subsidiary.

Of the storefront offices to be closed, 74 are in California, said David Kvamme, president of the subprime unit. “We know that this decision will be extremely difficult for those dedicated team members and their families who will be affected,” Kvamme said.

HSBC, the British banking giant that surprised the industry by buying Household Finance Corp. in 2004, closed the last of its U.S. subprime finance offices last year.

The San Francisco company said that it would continue to supply auto loans and credit cards to those with poor or weak credit through its national network of Wells Fargo Bank branches and offices of Wachovia Bank, the North Carolina giant that Wells acquired in 2008.

“We’re not exiting those products, just relocating them,” said Alanson Van Fleet, a Wells Fargo Financial spokesman.

But Wells, the nation’s largest mortgage lender, said it would no longer offer subprime mortgages, which now make up less than a tenth of 1% of the home loans the company originates.

Wells Fargo Financial offices still originate 2% of all of Wells Fargo home loans, but those loans are nearly all mortgages insured by the Federal Housing Administration, a niche that the prime home loan business, Wells Fargo Home Mortgage, already is in.

Of Wells Fargo Financial’s 14,000 employees, 2,800 will receive pink slips within 60 days and an additional 1,000 during the coming year, the bank said Thursday. The rest will be reassigned to other Wells units.

The announcement is the latest in a long series of closures of subprime lending operations, including the shutdown of independent giants Ameriquest Mortgage and New Century Financial Corp. in Orange County and Full Spectrum Lending, a part of Countrywide Financial Corp., in Calabasas.

Nearly all current and former Wall Street firms had subprime arms that are now defunct.

While regional players still operate subprime finance networks, only Citigroup’s CitiFinancial unit remains as a national player, and it announced this year that it would close hundreds of offices.

Wells Fargo Financial’s shutdown seemed certain to reignite complaints from advocacy groups, which for decades have criticized mainstream banks for abandoning poor and minority communities.

They said the loss of the consumer finance unit, coupled with cuts at CitiFinancial and HSBC’s closure of the Household Finance operation, could create even more inequities.

“If banks are going to focus on making better products available, then that’s a positive thing. If they’re going to exclude people who otherwise might’ve gone to Wells Financial, then that’s a problem,” said Kevin Stein, associate director of the California Reinvestment Coalition in San Francisco.

“It’s really on Wells now to make sure that the better products they’re offering are equally available to everyone,” Stein said.

Robert Gnaizda, a 40-year advocate for better inner-city lending practices, said loan losses and a regulatory crackdown by the federal government “are forcing all the financial institutions to give up [on serving] the 70% of Americans who live from paycheck to paycheck.”

scott.reckard@latimes.com

kristena.hansen@latimes.com