Yes, you can transfer credit, but it can be somewhat on the whims of the university department you're transfering it to.
I went to the head of the arts faculty for GU and asked if I could get a transfer. She looked at the forms and said "there's nothing similar I can transfer it under."
Two years later I went back to ask to rejoin uni, she finds the forms in my folder and benevolently adds credit on to my record. Without actually contacting the OU.
Win
I do believe there is a formal system of transfer, but it wasn't used in my case. (I still have two lots of OU credit waiting for me to play with.)
Also, the quality of internet tuition depends on the quality of the tutor. No more 'lost in the post' with your essays though...
