Apple service and water damage with iPhone 5C

My daughter has an iPhone 5C that was dropped in the water briefly. It started to have problem, so we tried a cleaning service ($35). They were not able to fix it, and they replied as follows:
Repair Shop: hello, no luck with the phone, i have another
service where if you take off the i cloud account from the phone, i can set up
a apple repair for you and they will replace your phone for free. the service
cost 100-35= $65 and i will set up everything for you. All i would ned is your
apple id and password to set it up for you, thanks
Me: I don't understand why you would need to remove
the iCloud service from the phone. Can you explain? Is it the official Apple
Repair? Why can I not do it myself?
Repair Shop: It is an official apple repair and I would need
it to set up repair
The sounds pretty dubious. Is there any truth to it and/or what are my options for repair/replacement from Apple.
Thanks,
-Mat

Yeah, that's either a stupid repair shop or a scam. You can remove a device from Activation Lock by going to www.icloud.com and logging yourself.
However, depending on what this repair shop did, you may have no options with Apple anymore. Did they open up the device at all?

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