Is it a bug or am I doing something wrong?
Settings for file size set to 17 megs and tried uploading an MP4 12.2 megs
How did you change it? Did you follow the steps in Change the maximum attachment/upload size
Okay I just did it in settings.
Is it possible to change uploads to only allow subscribers?
There are two topics about this and it’s not possible.
If you haven’t already, I suggest you do a quick search when you look for basic information, they might have already been answered in the past 
Jay has a point tho:
Allowing some users to upload files while others cannot may inconvenience both users and admins. External links are unreliable by nature, likely to expire in the future, or worse, be automatically replaced with something else. That has happened on one of my forums.
There is a theme component Restrict uploads which blocks uploads for lower trust levels. Maybe you can extend that to be group-based instead of trust level based.