They can switch on and off their deafness
There are two ways you can do it : Biologically or with technology. The first way needs some adaptation time (like more than a few millenias), while the latter is better suited for short or medium term adaptation.
The idea is quite simple : Plug something in your ears, and you are mostly cut from the world's music. Well, more waterfall noise but you get the gist. And if you are out of the big noise, just unplug and you can hear everything clearly.
Using technology, you can inspire yourself with real world contraptions (earplugs, anti-noise headphones for construction sites), using materials you could find in your caverns or from trade with other people. Even if you don't want technology, just put a wriggling larva lying in the cave, it's nasty, but it could work.
Using biology, the feys would most probably have evolved to have some kind of sphincters in their ear, they can open and close it voluntarily or unvoluntarily like a door. This could lead to interesting arguments where everything go to a deaf ear, since the participants litterally closed the door to their ear to bear with the ruckus.
Note that closing the ear won't prevent all sounds to come in, but you can add it to the fact that constant high-volume noises tends to make one reduce one's sound sensibility, making them effectively "deaf". A bit like when you live on a house against a railroad; After some time, you care less and less about trains passing by.
Another solution using a lil' bit of frame challenge (and counter-arguments)
I am wondering a little why these fey people would have a lot of noise issues to the point of losing hearing capabilities, aside when they're near the waterfalls. Here's the main reason why, and a little bit of counter-arguments to help you fight it :) !
To be able to live correctly, you need a bit of space, especially if you're living in society where you're more likely to want some intimacy. Even if there are echoes, the sound will quickly drop of if your caverns are a hundred meter long, to a point it will be a background noise, or at least not enough to damage permanently one's ears. And there probably won't be since your feys would probably build some structure to lower it : Non-reverberating walls/floors (made from fur/leaves, cavern mystical ooze...?), sound-breakers like walls that send back the sound to where it comes...
All of this, unless? Unless waterfalls are also pouring inside the caves or your fey people are deaf by nature, meaning they don't need those structures or they can't stop the sound with it.