In short, yes. You have a -7 reaction modifier with most people you talk to though and this makes them treat you quite differently. I'm not sure if you lose out on many quests but you get worse rewards in a lot of cases at least and store prices go up a lot. Flaming Fist/Cowled Wizards will also spawn to attack you every time you enter a new area. There isn't much point to having a reputation that low at all.
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