Without more specifics, it's hard to tell exactly what you're proposing, but with that being said...
I have a big problem when people start talking about it being the government's job to protect people from their own stupidity. If you're saying that the government should protect people against fraud by passing laws to prevent banks acting a deceptive/dishonest manner, fine. But if you make a law designed to prevent people who shouldn't take out loans from doing so, you've opened a big can of worms, because now it's the government's prerogative to decide whether or not you're ready to take out a loan, and not your decision anymore.
The fundamental purpose of government in a free society is to protect the rights of citizens. I think your example of preventing people from taking out a loan they can't afford is probably a good example of where the line is. That's clearly something the market can handle. If you can't afford the loan it's not in the best interest of the creditor to loan you money. So they'll likely decline. Markets work in that situation where each party's working in its own interest causes the right thing to happen.
But on the other side of that line would be where one side has an unfair market advantage to force unreasonable conditions. For example, say the bank requires that you provide them with all social media accounts so that they can monitor your social activity for social conformity. And of course you can tell them to go **** off. But then you don't get the loan. If all the banks require it, maybe because membership to some industry accreditation requires it, you can't get a loan without agreeing to let them monitor your social media.
Sounds far fetched, and maybe it is. The way things are today, I don't think it's that far fetched. But there really isn't much protecting people from those kinds of policies. I think such hobson's choices should be strictly regulated. I know the free market purists would disagree. But we don't have a free market. I'm not sure a truely free market economy is possible when scaled to hundreds of millions of people and many huge corporations operating with in it. Power has an advantage when the game is self-interest.