By Jonathan Stempel

NEW YORK, Feb 1 (Reuters) – Citigroup Inc  has shelved plans to impose new fees on more than a million customers nationwide who took out “free checking” accounts with its Citibank unit, New York Attorney General Andrew Cuomo said.

The New York-based bank’s agreement with Cuomo’s office requires Citigroup to extend free checking through 2010 for consumers who signed up for its “EZ Checking” and “Access” checking accounts between Jan. 1 and Nov. 5, 2009. Citigroup will also not charge fees on checks through Jan. 31, 2011.

Cuomo said the bank had planned beginning on Monday to assess monthly fees, typically $9.50, plus per-check charges of 50 cents or $1 to account holders whose balances fell below $1,500. He said the settlement saves customers tens of millions of dollars.

“Let all banks take notice: If you are going to change terms, and you think you are going to increase the fees you are charging consumers, make sure you do it legally, make sure you respect the consumers’ rights, and make sure you give notice,” Cuomo said on a conference call.

“Free checking means free checking,” he added.

Citigroup spokesman Mike Hanretta said the bank was pleased to settle. The bank denied any law violations, the settlement agreement shows.