Like the title says, what’s the big deal? It affects nothing and makes players happy by making themselves a little different. I don’t understand the hardline stance on something that doesn’t matter at all, especially since you can already type in color.
Remember in Game of Thrones when John wanted to mine the dragon glass? The advice given to Daenerys was give them something by giving them nothing.
I found the colored names distracting personally because then chat text was the same color as standard names. There are enough “flashy” colors in the game now and my eyes can only take so much.
It could have also led to potential exploits and was probably the main reason devs fixed it.