On line customer was hosting a key logger and subsequently had unauthorized on line bill pay checks flying everywhere. Since the payments were originated electronically are we to consider these as Reg E dispute claims?

I think I stumbled on the obvious answers. If the payment goes as an ACH its Reg E, if it goes by draft its a remotely created check and we go that route.

Agree. Paper check mailed by CheckFree/iPay is a paper check; sent via ACH is Reg E ACH.

Is the paper check drawn on the customer's account or a separate omnibus account?

Note the staff interpretations regarding bill pay:

vi. A payment made by a bill payer under a bill-payment service available to a consumer via computer or other electronic means, unless the terms of the bill-payment service explicitly state that all payments, or all payments to a particular payee or payees, will be solely by check, draft, or similar paper instrument drawn on the consumer's account, and the payee or payees that will be paid in this manner are identified to the consumer.