The House Financial Services Committee passed by a large margin a bill that toughens regulation on credit rating agencies, and for the first time, sets conditions that would allow investors to sue the agencies.

Agencies such as Moody’s and Standard & Poor’s have received some of the blame for the housing crisis because of lax ratings on mortgages and securities.

“The Accountability and Transparency in Rating Agencies Act aims to curb the inappropriate and irresponsible actions of credit rating agencies which greatly contributed to our current economic problems,” said Rep. Paul Kanjorski (D-Pennsylvania), who sponsored the bill (H.R. 3890).

The bill, which passed by a margin of 49-14 in a bipartisan approval, clarifies the ability of individuals to sue the nationally recognized statistical rating organizations (NRSROs). It also clarifies that the limitation of federal or state agencies to regulate the substance of credit ratings or ratings methodologies does not afford a defense against civil anti-fraud actions.

In the past, credit rating agencies have claimed that their ratings are opinions that are protected as free speech by the First Amendment, even though numerous laws and regulations require a certain rating as a threshold for investment by regulated entities.

Regulators have criticized the agencies for their failure to properly assess the risks posed by mortgage-backed securities that included subprime mortgages.

“Lax lending standards employed by lightly regulated non-bank mortgage originators initiated a downward competitive spiral which led to pervasive issuance of unsustainable mortgages,” FDIC Chairman Sheila Bair said recently. “Ratings agencies freely assigned AAA credit ratings to the senior tranches of mortgage securitizations without doing fundamental analysis of underlying loan quality.”

The new bill requires agencies to disclose their methodologies in evaluating structured products and tightens up potential conflicts of interest, such as an agency consulting with an issuer about ways to ensure a favorable rating for the products.

Other provisions of the bill include a new requirement for the agencies to supervise employees and an authorization for the SEC to sanction supervisors for failing to do so. The bill requires NRSROs to have a board with at least one-third independent directors.

The bill also addresses the problem of revolving-door employees, requiring the agencies to conduct a one-year look-back into the ratings of any employee who goes to work for an issuer to make sure that its procedures were followed and proper ratings were issued.