The banking industry's worst fears about mutual fund sales may be coming to life for Barnett Banks.

A disgruntled customer who lost money on mutual fund shares purchased at a branch of the Jacksonville, Fla., banking company is trying to drum up support for a class action lawsuit.

His claim: Barnett coaxed him and other customers to switch money from insured deposits to uninsured mutual funds without fully explaining the risks.

The lawsuit has not yet been filed, and indeed may never materalize. Even so, the episode makes clear that banks could be facing a serious backlash from consumers who have bought mutual funds.

Disputes Seen Brewing

Lawyers and state regulators suggest similar disputes are brewing around the country.

"I think everyone has expected that in a down market there could be litigation," said Melanie Fein, a law partner with Arnold & Porter in Washington.

The customer, Richard C. Hilton, has gone so far as to place classified advertisements in Florida newspapers seeking other Barnett fund buyers who might join him in a class action suit.

For its part, Barnett declined to discuss Mr. Hilton's claim.

But in a telephone interview, Barnett's retail banking chief, Thomas Johnson, said there is no evidence of a "systemic" problem with the bank's investment product sales practices.

He said Barnett makes the verbal and written disclosures required by banking regulators. In addition, the bank prominently displays signs that show that investment products, unlike bank deposits, are not backed by the Federal Deposit Insurance Corp.

Barnett also has begun its own mystery shopping program to make sure that the oral sales pitches used by its sales staff match the bank's policies, Mr. Johnson said.

Mr. Hilton, who had lost $4,500 of his $50,000 investment by the time he cashed out of it in September, did file a cimplaint against Barnett with the Florida region of the Office of the Comptroller of the Currency, according to his lawyer.

But the agency rejected his claim, saying a review showed that the bank had given Mr. Hilton adequate written disclosure that this mutual fund lacked deposit insurance and carried risks, including possible loss of principal.

Such disclosures are the bedrock of the regulatory guidelines that banks selling mutual funds must follow. Guidelines also direct banks to evaluate customers to make sure that the investments they buy match their needs and their tolerance for risk.

Ms. Fein of Arnold & Porter said customer complaints are "troubling," but banks should have no difficulty in defending themselves, provided they are following the rules.

"I don't know what more the banks could do to protect themselves," she said.

State securities regulators see matters differently. They say complaints about mutual fund sales by banks are on the rise, and could be a real headache for banks.

One reason is that bank customers have been conditioned for 60 years to believe everything sold at a bank is federally insured, said Michael J. Vargon, deputy director of the New Mexico Securities Division.

Not Everything Is Insured

As banks move into selling uninsured products, "they're going to have to take some extraordinary steps" to overcome this perception, he said.

In Texas, Securities commissioner Denise Voight Crawford said her office has received complaints from elderly bank customers who feel their banks have sold them unsuitable investments, such as growth funds.

These customers have been "lulled into complacency, because they've never had to worry about whether what they were doing on the premises of a bank would be covered by the federal government," Ms. Crawford said.

And in Florida, customers are complaing to the Comptroller's office because they want to get out of the mutual funds they bought, but find they must pay sales charges when they redeem their shares, a spokesman said.

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