It’s ridiculous stuff like this that will call for greater government regulation for stranded passengers.

If a passenger misconnects and is stranded overnight due to something within AA’s control like MX, they absolutely should make arrangements for hotels. Telling passengers that the system is “sold out” by itself is already unacceptable. Then imposing some ridiculously low cap when passengers are told to book for themselves and submit for reimbursement is outrageous.

OP should definitely file a DOT complaint.