It’s not a problem with FA, it’s a problem with people using the DSM who don’t understand how the math behind it influences what they are doing. Ditto for IQ. If you use IQ measures professionally, you should grok FA.
It’s poorly understood by many who use the DSM, and without understanding how arbitrary and or subjective it can be it may be difficult to avoid “overfitting” in the clinical setting.
How familiar are you with factor analysis? I worry that because the best mathematical minds are often not attracted to psychology as a field, that psychologists as a group are somewhat blind to implications of statistical choices and assumptions that they inherit or make.