I had this happen a little while ago. I don't recall exactly, but either exim was not running or exim had been upgraded. I quit fetchmail, restarted exim and then restarted fetchmail. That fixed it. If it does not, for some reason, there is an argument you can put in your .fetchmailrc that will strip the ^M's. I don't recall what it is, maybe stripcr? It was on the man page or the webpage. Good luck.
Brian Flaherty