Often new bloggers link indiscriminately to other sites as they aren't experienced enough to know what constitutes a "'dodgy site". In addition many new bloggers get into reciprocal linking arrangements. Simply stated reciprocal links are based on an agreement by two sites (two way) to link to each other. Quality reciprocal link exchanges in and of themselves are not a bad thing, but most reciprocal link offers are of low quality. If too many of your links are of low quality it may make it harder for your site to rank for relevant queries, and some search engines may look at inbound link and outbound link ratios, as well as, link quality when determining how natural a site’s link profile is.
Before you consider reciprocal linking to sites, consider your readers' perspective and whether the proposed links provide value to them. If the sites content is related to your own site, then it could make sense because the links are organic and useful, but reciprocal linking between dozens or hundreds of sites, however, is unlikely to provide reader value, and linking to many unrelated sites is detrimental.
Search engines like Google use link popularity as a method of ranking your site in their results. The more related sites that link to your site (especially high traffic sites relevant to your field), the higher on the page your site will appear when someone searches on “your” keywords.
Questions: Is it appropriate to let them know this? What do you do?
Nothing and this is why. The last time I brought this up on this forum a member with blog that was over a year old that still lacked a page rank at all and still does, and only has unrelated links it his/her/its/ blogroll personally attacked me.