The state’s massive effort to turn food stamps and welfare checks into ATM-type debit cards could result in unforeseen dangers for low-income New Yorkers, advocates charge.

“It’s not an inherently bad idea, but it has a lot of scary problems that are going to have to be fixed,” says Liz Krueger, a welfare activist who sits on the state committee overseeing the implementation of the electronic benefits transfer (EBT) system.

Krueger and other welfare advocates believe the new system, which is mandated by the federal welfare law and is due to begin in parts of the city in July, should be carefully scrutinized before it is implemented.

Sarah Ludwig, executive director of the Neighborhood Economic Development Advocacy Project, points to the fact that Congressional Republicans eliminated all consumer protections from the welfare legislation, leaving welfare recipients liable for debits run up on stolen cards. And while Congress placed a ban on fees for use of food stamps, they left open a loophole that allows Citicorp–which will run the system–to impose an 85-cent fee on each welfare account transaction that exceeds the four free withdrawals per month granted by the company.

In addition, Krueger says, there are no prohibitions against local merchants from gouging welfare recipi-ents who use their cards to buy groceries or other products off their card.

The EBT contract is one of the largest welfare privatization contracts in the country. Under an unusual arrangement, Citicorp has received contracts with a consortium of seven northeast states that will be worth nearly $1 billion over its first seven years, according to American Banker magazine. In February, a group of New York City check-cashing vendors successfully sued to block the system, but state Department of Social Services has the right to proceed with EBT until an appeal is heard later this year.