Southwest has the same policy as AA. If you comingle any travel credit and additional cash, the entire new fare becomes non-refundable. I believe most US airlines follow this policy.

A fare can be non-refundable. Most fares are. I think, in my entire life, I've bought one ticket that was refundable (not counting awards).

That has nothing to do with the 24 hour refund required by the DOT.

There are lots of fares that are refundable - many have cancellation penalties, but i would posit that non refundable fares are not in the majority

I don't think that AA would overly care - it would be able to simply change the situation such that changes are permitted and take away the option to hold value - changes will just require confirmation rather than effectively being open dated

From an consumer standpoint, this is a distinction without a difference.

I disagree - it is very common to purchase fares which have penalties associated for changes and refunds - much more common than not beting able to make changes or get refunds at all

Purchasing a $2000 ticket that has a $300 cancellation penalty is significantly differemt to a $2000 ticket where value is lost if unable to travel on the booked date

That's not what I said though - no one would confuse a ticket where value is lost as refundable.

The vast majority of fares in the US are non-refundable. It's only as of relatively recently that there are reasonably priced options that are refundable.

Anyway, this has absolutely nothing to do with the DOT policy. You can buy a basic economy ticket which is not only non refundable, but loses all its value when cancelled. The fare rules clearly spell out that the ticket is not changeable or refundable. But, again, the fare rules do not override the DOT policy and do they can be cancelled for a full refund within 24hr.

Whether the ticket is refundable has absolutely nothing to do with whether it can be cancelled for refund within 24 hr. I'm not sure why it's being discussed. It's completely irrelevant.

I'm fairly certain that the clarification would be that any new funds collected would be fully refundable within 24hr of them being collected. This is, after all, clearly the intent of the rule.

I would disagree. If you have a ticket from A-B on a specific date and then make a change to a new date or route where the fare is higher, a fare difference applies; this fare difference is not fully refuindable for 24 hours
If as the fare rules put forward, that this is just the use of an existing ticket rather than being a new booking, how would this be different?

I would say that the best thing to do is wait to see AA's response to any DOT referral - maybe DOT will side with this being a new booking and that a full refund is due, but I could also see it agreeing that this comes as a change to the original booking as detailed in fare rules ; I don't see that this is a clear cut situation where there is no doubt that the passenger will prevail over AA with DOT

There is zero indication to a customer that use of a trip credit is a ticket being reissued.

If I return an item for store credit at target and now buy a new item, am I held to the return policy of the original item? I am not.

Take off the FT hat and look at it like a normal consumer would. I understand your point, but my mom wouldn't and my friends wouldn't either.
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In the end, it only matters what the DOT thinks - my points are addressing what AA puts in fare rules in relation to holding a tickets value in credit - what I personally think, or your mother thinks matter not - would you actually disagree that AA does detail its rules in a way that is in line with its refusal? it will be interesting what DOT decides

It would make it much clearer if it removed the holding of value and simply required a confirmed change

DOT will not do anything and neither will OP get a refund of the additional funds used for the ticket. It will now be a trip credit for the total amount. AA’s contention is that it is a rebooking or more importantly an “exchange of ticket” and not a new booking. I really had hoped that DOT would force AA to be transparent since that was part of my complaint about it back in March but yet here we are.

I'm not sure that's what they're doing. Exchanging a ticket with an A/C to me would only result in a new trip credit if the itinerary was cancelled a second time. I've never expected a refund of the A/C when cancelling within 24 hours a ticket on which I exchanged a prior ticket.

I guess I don't understand why one wouldn't just hold this itinerary for 24 hours before exchanging a prior ticket, which AA allows per DOT regulations.

AA does not present this as "exchanging a ticket with an add collect". If you look at the website experience, it's quite the opposite. You select whatever flights you want, AA shows you a price, and then you apply a travel credit to that price. That's the opposite of "you are changing this old flight and we are charging you a little bit extra for it." In fact, AA allows you to apply multiple credits to the same flight--there's no way to reconcile the idea of apply multiple previous tickets to a new one with the notion that all you're doing is changing the old ticket to the new one. No reasonable person would look at the way that AA presents the ticketing flow and think it's anything other than buying a new ticket and applying some existing credit to it. If AA wants to exclude this from the 24 hour refund policy advertised on their website, they should do it very clearly. In fact, they don't do so at all--even if you look at the terms and conditions of using a travel credit there's no mention of the fact that the 24 hour refund would no longer apply.

just wanted to add that you also get a new PNR.

I disagree. Adding a trip credit in the form of a previously used ticket and having to pay an add/collect is exactly this. I did this just last week. I cancelled an existing PNR, rebooked 15 min later applying the previously issued ticket, and paid an A/C. At no point in the process did I think I'd get a refund of the A/C if I cancelled within 24 hours. If I had held the ticket for several weeks or months, I'd still have thought the same.

I do concede AA should make this more explicit by saying that, if you want to apply a trip credit, that you should instead hold the reservation for 24 hours if you think you might cancel.

Here's another way to look at it: Back when we had change fees, would you have expected the $200 change fee to also be refunded if cancelled within 24 hours? To my knowledge, it never would have been, on any carrier.