The hearing fee is paid by the claimant. Only if the defendant loses will he be liable to re-imburse the claimant for the court costs the latter has had to pay thus far, which includes both the hearing fee and the fee to issue the claim. You may have missed this bit in Para 7.11 of Guidance Notes:
my added emphasis.Fees are payable to the court by the Claimant when issuing a claim in the IPEC small claims track and when the final hearing is fixed, and by a party who issues an application. There may be exemptions available depending on the payer’s financial circumstances.
As for your other point, here's a definition of fraud by false representation taken from section 2 of the Fraud Act 2006:
The methods used by these claims management companies are certainly morally dubious and tend to rely on the person who receives one of their claims being frightened by their threatening language, and paying up without question. But we have to remember that in many cases the underlying issue of copyright infringement will be true. Many recipients of these claims are not entirely innocent, although they may have been naive. The civil justice system is there to help the claimant get redress for the wrong which has been done to him. While that doesn't justify the tactics used by these companies, it does mean that their enterprise lacks the necessary criminal intent (note the words 'state of mind' in subsection (3)) to turn it into fraud. I'm sure that if you or anyone else decide to report these companies to Action Fraud, they will tell you this themselves. Unfortunately that will involve them diverting attention away from their proper job which is analysing and prioritising real frauds and allocating them to police forces to investigate.2 Fraud by false representation
(1) A person is in breach of this section if he—
(a) dishonestly makes a false representation, and
(b) intends, by making the representation—
(i) to make a gain for himself or another, or
(ii) to cause loss to another or to expose another to a risk of loss.
(2) A representation is false if—
(a) it is untrue or misleading, and
(b) the person making it knows that it is, or might be, untrue or misleading.
(3)“Representation” means any representation as to fact or law, including a representation as to the state of mind of—
(a) the person making the representation, or
(b) any other person.
(4) A representation may be express or implied.
(5) For the purposes of this section a representation may be regarded as made if it (or anything implying it) is submitted in any form to any system or device designed to receive, convey or respond to communications (with or without human intervention).
If you really want to put these companies out of business, lobby your MP. If enough people do this, the Department for Business, Energy and Industrial Strategy might get the Intellectual Property Office to introduce legislation to outlaw it, but I won't be holding my breath on that.