UPDATE:
So I just called apple today and spoke to their advisers. The first person I talked to, tried to get me to purchase apple care plus. He told me my device was still within a window to get it and if I wanted I could purchase it now and get a brand new device for $79. I told him I would like to send it back for warranty purposes. He then sent me to another rep who I had to wait for about 20 mins. This adviser was much more helpful. I told them my situation - Basically said My iPhone is bending by the volume button. I did not do anything to cause any kind of bend and have only been using it normally. The device screen now has a yellow hue next to the volume button section of my phone (as I posted in another picture earlier) she said she has never heard of this problem before.
She then asked if I would like to setup an appointment with the genius bar, I explained to her that since I live in HI on an island that has no apple store that would be difficult. She then set me up with a return ticket. I gave her my address and she said she would ship over a box that I could use to ship my device back.
I asked for a replacement device to use while they have my phone and are examining it, (Because being in HI I would more than likely be without a phone for 1-2 weeks) she said she could do that for $29. Do I honestly think I should be paying for this replacement device while apple "checks out" my iPhone because of a manufacturing flaw on their end? No. But at this point I didn't try to dispute this charge because honestly im over it and just want my phone fixed.
So that's where im at now. Much more helpful apple response today and from the looks of it as of now, I will be getting a replacement phone once apple checks out my phone and makes sure the damage is not cause by accidental drop or water damage.
Will update if any changes happen so others who may be having this problem can follow suit.
I agree that's pretty bad service.
The first person you spoke to was advocating you violate Apple's own terms. You're only supposed to be able to buy AppleCare Plus if the phone is not already damaged. By saying he could then replace your phone for $79, the representative was saying he thought the phone had accidental damage, which would preclude you from purchasing AppleCare Plus to begin with. Very shady. As I said before, most people you speak to when you call Apple for iPhone support don't work for Apple. Apple has contractors all over the country and they are pitted against each other with metrics such as best call time, lowest cost, highest AppleCare sales, etc. When I worked for Kelly, one of Apple's contractors, I had sought out that company because I wanted to work for Apple (indirectly). I knew all about Apple's products and services. Everyone else I trained with had never used a Mac before, and since AppleCare support (including iPhone support) uses a Mac, we spent a lot of training just on how to use a Mac instead of actually learning about the iPhone and policies. To do well in the company, you needed to be a hustler. Metrics are all that matter because these companies you work for can easily lose their contracts with Apple. At the company I worked for, to make above the poverty line working full time, you'd have to move up several levels within the company to a leadership role, and even those only pay $1-2 more per hour. The starting pay was $9 an hour and you had to provide all your own equipment and Internet service (it was an at-home job). It's different when you work directly for Apple. There's much better pay, benefits, they pay for your equipment, and from what I could tell, the Apple employees were much less worried about performance and hustling customers.
Also, the person you're speaking to when you call may never have even used an iPhone before, let alone the latest generation. I thought I had applied for a Mac technical support job, but it turned out to be for iOS devices (almost exclusively iPhone). I had never used or owned an iPhone, though. They sent us iPod touches (3rd generation) that we used for a few weeks during training and then sent back. But what was most frustrating for me was that they assumed you had a lot of experience with Windows (which everyone in my group had but me). We spent almost all of our time with really, really basic "how to use a Mac" training. My trainers were not Apple employees. They talked about how much more they preferred Android and used a lot of Windows jargon I was not familiar with. At least when I worked for Kelly, most iPhone users who called in were Windows users, which meant I had to troubleshoot a lot of iTunes issues without having used a PC since grade school. I asked for training and help but never got it. I even considered buying a PC out of pocket just so I could understand the iTunes troubleshooting steps better. I would try to follow along with the instructions in Apple support documents, but I couldn't actually practice it myself. I would just read it to the customer as if I knew what I was talking about. And believe me, I asked for training. There was supposed to be Windows training, but we never did it.
The second person who gave you the replacement with the $29 service fee was technically correct; although, I don't agree with the policy. Basically, if you don't have AppleCare on your iPhone you have to pay $29 for "Express Replacement Service" (when you get the new phone before they get yours). I'm surprised that person didn't try to upsell you on AppleCare Plus, which was one thing we were supposed to do when a customer wanted Express Replacement Service (because when you have AppleCare you don't pay that $29 fee).