There is nothing wrong with effective quantum general relativity as a QFT. It works fine and we can get effective answers for calculations. That said, most are not interested in calculating scattering cross sections and amplitudes with quantum GR in a relatively low energy limit, they are interested in the character of space time and Plank scale physics which effective GR isn't all that useful for.
Most would argue that we need a background independent, UV complete theory to answer big questions about the nature of spacetime at the Plank scale.
Edit:
We can work with just the EH action in an effective approach but the scattering amplitudes will depend on our energy scale. If we go up to too high an energy scale, our answers won't make any sense unless we add a counter term of higher order to $\mathcal{L}$ multiplied by some a priori unknown coupling constant which has to be determined by experiment. If we start asking about even higher energies we'll need to add an even higher order term to $\mathcal{L}$.
If we only use the term in the Lagrangian we know from the classical theory (ie. The Einstein Hilbert Lagrangian), we can learn a little about quantum gravity, but not all that much. What to do about this situation is largely up to personal taste.
If you ask someone who takes seriously the insights from classical gravity they will tell you that the problem is not the Lagrangian, but perturbation theory. Perturbation theory destroys the background independence of General Relativity and we shouLdnt be too surprised that perturbation theory isn't a straightforward and easy way to learn everything we know about quantum gravity. Imagine in classical gravity trying to find the Schwarzchild solution pertubatively (ie, linearized gravity), that's clearly going to be extremely troublesome.
Question: What is an appropriate cutoff for effective gravity?
In units where $c=\hbar=1$, when one calculates the scattering amplitude for gravitons they find that the energy scale dependence goes as
$$1+GE^2+(GE^2)^2+...$$
Where G is Newtons constant.
So, we need to start worrying when GE^2 gets to of order 1 because then that series is divergent. This tells us that $\Lambda \approx \sqrt{\frac{1}{G}}$, which is just the Plank energy in our unit system! This tells us that an appropriate cutoff for quantum gravity is the Plank scale.
This answer is adopted from Quantum Field Theory in a Nutshell by Zee, page 172