What happens when you fail a quest? You drop it and try again. Nothing lost. Maybe you died. Overall, no big deal.
It's boring. There's no impact. It's a slight inconvenience. Oh noes.
Permanent failure would 'fix' that. Fix being in quotes because it wouldn't be worth the loss of fun. Imagine the horrible mob grinding if you ran out of quests. No thanks.
What if failure meant something more than just failure? Failure could open up different quests. But again, this means restricted content and the potential for people failing just to see the quests.
How about fixing our mistakes instead? Failure might mean dying and then you must fix your mistakes in the spirit world. Lose here? Try again, over there.
Or maybe after a dozen failed and retaken quests, you're sent to cleanse your spirit. It is revealed that the failure did have a negative impact and you must correct that in yourself. You'd need to complete this quest to advance further, but it would give XP to compensate for the slowed leveling and so it feels less like a barrier and more like an opportunity.
Too often death and failure are entirely trivial. We can barely notice them sometimes. This isn't good for learning. Death and failure should matter and be noticed. But permanent failure and XP less/debt like in other games are not the solution. Those only encourage us to do the most trivial possible tasks in order to avoid losing.
LOTRO: The sights and smells of Gondor
8 minutes ago