When 'free checking' isn't free

NEW YORK (CNNMoney.com) -- Free checking will remain free for a just little bit longer for some Citibank customers.

In an announcement made Monday, New York Attorney General Andrew Cuomo said his office had struck an agreement with the banking giant for failing to notify customers about fee changes on several of its free checking accounts.

"Free checking still means free checking," he said during a press conference.

Cuomo, who has become a formidable opponent of the nation's biggest banks, alleged that customers who opened an "EZ Checking" or "Access" checking account with Citibank, were never warned that the company could impose check charges or monthly maintenance fees even if the customer met the basic account requirements.

When Citibank finally did alert its customers to the changes last November however, customers were not given adequate enough notice, according to Cuomo's office. It estimated that the fees would have cost consumers tens of millions of dollars.

Citibank, and its parent company Citigroup (C, Fortune 500), will not pay a settlement as a result of Monday's announcement. The company also denied it had violated any laws in the matter.

Customers who did sign up for a free checking account between Jan 1, 2009 and November 5, 2009 however, will have their free checking extended until the end of 2010.

Citibank also said it will not charge qualifying customers check fees until January 31, 2011.

Cuomo said he hoped that Monday's settlement with Citi would serve as a notice to other banks.

With the industry bracing for a wave of profit-crimping new regulations, lenders have been closely examining a number of options aimed at boosting their bottom line, including raising new fees and instituting new ones on their checking account customers.

"We will continue to scrutinize the fees that banks are charging customers," he said.

Monday's announcement is Cuomo's latest attempt to rein in questionable practices at both Citigroup and the nation's other leading financial firms.

Last month he demanded that the company, as well as the seven other biggest bailout recipients, divulge details on the payment plans for 2009 bonuses in an effort to see if they had made any progress rooting out some of the destructive pay practices that helped fuel the recent economic crisis.