NEW YORK, Oct 23 (Reuters) - New York Attorney General

Letitia James is investigating whether Capital One's

proposed $35.3 billion takeover of Discover Financial Services ( DFS )

violates the state's antitrust law.

James asked a state judge in Manhattan in court filings on

Wednesday to subpoena Capital One for documents needed for her

probe, citing the bank's alleged lack of cooperation.

James said a merger could have a significant impact in New

York because Capital One and Discover respectively have more

than $9.5 billion and $6.5 billion of credit card loans there.

She also said the impact of a merger would be "particularly

felt by the often vulnerable New Yorkers with subprime credit

scores."

Capital One, based in McLean, Virginia, is one of the

largest U.S. banks, with $480 billion of assets as of June 30.

It expects to report third-quarter results on Thursday.

Discover, based in Riverwoods, Illinois, reported a $965

million third-quarter profit last week.

Capital One said in a statement that it would respond to

James through appropriate legal channels, and was "well

positioned" to win merger approval from federal banking

regulators.

"We have made a strong case on the pro-competitive and

pro-consumer benefits of this transaction," it said.

Discover did not immediately respond to requests for

comment.

The all-stock merger, announced in February, would create

the largest U.S. credit card issuer with more than $250 billion

of outstanding loans, surpassing JPMorgan Chase ( JPM ), and

access to more than 305 million cardholders.

James said the merger would extend Capital One's lead as the

largest U.S. subprime card issuer, and give the combined company

a market share of more than 30%.

A merger would also help Capital One, which issues Visa- and

Mastercard ( MA )-branded cards, expand its payment operations.

The merger also requires approval by shareholders, the

Federal Reserve and the Office of the Comptroller of the

Currency. Capital One and Discover have said they hope to close

by early 2025.

James said her office asked Capital One and Discover in May

to waive confidentiality so it could review documents they

submitted to the Justice Department's antitrust division.

Discover agreed to a full waiver but Capital One did not,

claiming it would give New York unlawful "visitorial power" over

national banks, leading to the subpoena, James said.

Customers have also sued Capital One and Discover, saying

the merger would reduce competition and boost consumer costs.