Nuts.
The facts are these:
During a photographer's lifetime, copyright does belong to the photographer. (I know, I'm married to one!). In the past, the photographer would usually keep the negatives to ensure the customer didn't go getting prints elsewhere. Today, they'll often hand a wedding couple, say, a CD so they can print their own (looks good to the customer, but they won't get the higher quality prints a pro can give them - but then, some prefer it that way.)
The photos become public domain 70 years after the photographer's death. If you have photos 100+ years old, they most likely are public domain. Any copies of them - and indeed, any photocopies of any public domain visual material - are also public domain. This means you, or anyone, can do what you like with them. I scour swap meets and flea markets for those postcards they used to make from family photos, to use them in collage. Lots of other collage artists do likewise. This is perfectly legal.
The laws on material still within copyright are strict as heck. In theory, you can be sued for cutting out recent magazine pictures and using them in a collage, no matter how much you alter the source material. In practice, we work with what we can get away with! The 'fair use' clause doesn't apply to visual stuff the way it does to text. If the law had worked this way in the past, artists like Max Ernst, Kurt Schwitters and Peter Blake would have been breaking the law, because they used contemporary clippings.
The truly annoying thing these days is the spate of photo agencies like Getty
buying up material which was previously public domain - stuff like historical archive photos - making it their copyright, and charging people for its use. Stuff that was previously freely available online. I'm all for the people who track down hard-to-get-hold-of vintage stuff and sell them at $20 a book for 500 images like Dover do. They mean I don't have to pore through hundreds of secondhand stores searching out Victorian magazines. But there are agencies who do the same thing and charge $300 a time, and that's plain greedy. (Especially when, with a little research, you can find the same images elsewhere online for free.)
I've never heard of any copy shop in the UK laying down the law that way, although most stores (and libraries) do have warnings up. My own solution is to have a scanner at home. Not a solution everyone can afford, but the only way to make sure no jobsworth tells you what you can and can't do.
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"Grunge? Isn't that some gross shade of greenish orange?"