That is obviously sloppy work on the part of the developers. And bad. But anyone that can snoop on loopback already owns the machine and he could just cheat engine the passwords from the browser ram.

So it is not making safe situation bad, but bad situation worse. Of course with Blizzard Warden, Steam anti cheat, driver level firewalls and all the other little helpers that collect information about your system - this could lead to a leak to some entity's logs in the cloud.