Mascot Finance was yesterday placed in receivership but customers will get all of their money back as the company is covered by the Crown's deposit guarantee scheme.
Mascot is the first financial institution approved under the scheme to trigger the guarantee.
Treasury secretary John Whitehead said Treasury would pay out guaranteed deposits as soon as possible.
The finance company had 2558 debenture holders with $70 million invested.
"The deposit guarantee scheme was put in place to give New Zealand depositors confidence that their money would be secure in the event an approved financial institution failed.
"The Crown stands behind the deposit guarantee scheme and Mascot Finance depositors can be assured that they will get back all of the money they are entitled to under the guarantee."
Straightforward claims should be able to be paid out soon after a claim was due and payable, while more complicated claims could be expected to take longer, he said.
While Mascot's receivership was of concern to those involved, New Zealand's financial sector remained sound and people could continue to have confidence in it, Mr Whitehead said.
Deposits covered by the guarantee included the principal sum deposited, along with interest accruing in accordance with the terms of the deposit up to $1 million per depositor, per institution.
Treasury's website (www.treasury.govt.nz/economy/guarantee/retail/claims) had initial information for eligible Mascot Finance depositors on the processes for claiming their entitlement.
Perpetual Trust Ltd appointed Deloitte partners Brett Chambers and Paul Munro as the receivers of Mascot.
The appointment of receivers followed discussions between Perpetual and Mascot directors.
"In continually reviewing impairments in the loan book, the board has concluded that a major loan is now unlikely to be recovered in full.
"A write-down of that loan would result in a breach of the company's trust deed."
Repayments of all deposits had been frozen, but the requirement of borrowers to continue to meet their instalment and repayment obligations remained, the receivers said in a statement.
The meltdown of New Zealand's finance sector has slowed since last year, but from May 2006 to July 30 last year, $4.5 billion was lost as finance companies, funds and mortgage trusts collapsed.
The most spectacular collapse was that of Bridgecorp, which defaulted owing about $500 million to 18,000 investors.
