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If I gave them to you when you asked, you did not get the password and username by tricking me. But if I wasn't aware of the potential consequences of doing so, I am tricked into doing something I shouldn't have done.
Most dvds state that rental is not allowed, while most books just prohibit the illegal reproduction of the book without saying that rental of book is not allowed. To prove my point that it is perfectly alright to lend your friend a dvd or book, I emailed the IPOS (Intellectual Property Office of Singapore) but instead of a reassurance that it is alright, I got a reply that told me to consult my lawyer. Nonetheless, I'm pretty sure that something is considered rental only if there is monetary gain.
Indeed this hurts the business model of the book authors and the publishing firms. In this case, there is only one physical copy of the book so it is not copyright infringement. Also, would those who use the service have bought the book in the first place? Without this service, will they eventually borrow the book from their friend's friend anyway (through word of mouth or online networking tools), go without the book, or share a book with a course mate?
If someone who has a book wants to lend it to others, it should be perfectly alright. At any point of time, the (total time of all bought books in existence)/(total time of bought books being read) is already way greater than one. Why should it be the case that we are not allowed to decrease this ratio just to ensure that authors and publishing firms can earn more? It makes better sense for mother earth if the ratio is close to one.
At the end of the day, if students do not photocopy the books in excess of what is legally permitted or do not pay the photocopying copyright fee, there is no copyright infringement. This service is just to facilitate the sharing of resources. Even if this service makes a profit through membership or advertisement, and it actually does contribute to lesser people buying books, it shouldn't be illegal. The internet makes it easier for people with similar interests to communicate and achieve their common goals, money-grubbing companies should just get over with it.
If this is illegal, so should bookcrossing, freecycle, craigslist, free giveaways, garage sales etc... In fact, I see this as a specific application of the first-sale doctrine (just that money being exchanged is 0).