I would support more a fifht faction, that wouldn't require reputation, for people who don't want to join the four main faction but still want to fight.
Amongs factionless characters, there are people that haven't choose a faction, are about to change faction, got expelled from their faction and try to raise back they reputation, or made a mistake they are unaware. They shouldn't be shot of sight because some people with the same colors decided to mess with other players.