You can legitimately claim royalties for an arrangement of a traditional song, but it has to be a proper arrangement, just adding guitar chords doesn't count. Also, there is a fee to join PRS as a composer, so you have to be performing your material fairly regularly for it to be worthwhile.

The club was grassed up by a visiting performer. However they were fully entitled to put in a claim, and the pub should have had a PRS licence, so no complaints there. However the rate the PRS tried to charge was based on the full capacity of the room and an optimistic assumption of what the audience might pay. The pub landlord, who was responsible for the licence but otherwise had no involvement with the folk club and who simply hoped to sell more beer, was unhappy with this, but even more unhappy with the PRS representative's attitude. Somehow it got smoothed over and the club carried on, but it was a near thing.