H&R Block Inc will pay as much as $20.2 million to settle a New York lawsuit accusing it of fraudulently marketing retirement accounts that caused hundreds of thousands of mostly lower-income clients to lose money.

New York Attorney General Andrew Cuomo said the accord calls for the largest U.S. tax preparer to refund $11.4 million to $19.4 million of fees to customers nationwide who opened one of its Express IRAs, a type of individual retirement account.

H&R Block will also pay $750,000 in fines and other costs to the state, and convert Express IRAs into new retirement accounts that do not charge fees, Cuomo said. The size of the refund depends on the number of claims made, he said.

The attorney general said H&R Block also settled private class-action lawsuits based on the same allegations, and which were pending in the federal court in Kansas City, Missouri, where the company is based.

Norman Siegel, a lawyer representing plaintiffs in the private litigation, in an e-mail declined to discuss terms of that settlement, but said he expects to file papers with the court in the next few days.

New York had accused H&R Block of steering more than 600,000 customers to Express IRAs, without disclosing hidden fees that wiped out the interest that 85 percent of them could earn. Eliot Spitzer, Cuomo's predecessor, had first sued H&R Block over the marketing of Express IRAs in March 2006.

H&R Block's aggressive peddling of fee-laden retirement accounts that were virtually guaranteed to lose money needlessly cost families across the country millions of their hard-earned dollars, Cuomo said in a statement on Monday.

Gene King, an H&R Block spokesman, called the New York settlement satisfactory for all parties. He had no immediate comment on the class-action settlement.

Spitzer originally sought $250 million of civil penalties and other remedies. His lawsuit had said the median Express IRA account had a $323 balance, too low for investors to offset such charges as $10 annual maintenance fees, $15 set-up fees, $15 re-contribution fees and $25 termination fees.

Among the defendants in the New York case was H&R Block Financial Advisors Inc, which the company sold in 2008 to Ameriprise Financial Inc. Ameriprise did not return a call seeking comment.

In late afternoon trading, H&R Block shares were up 7 cents at $22.69 on the New York Stock Exchange.

The case is New York v. H&R Block Inc, New York State Supreme Court, No. 401110/2006.

(Reporting by Jonathan Stempel; Editing by Andre Grenon and Richard Chang)

New York Lawsuit